Query Corner: Arvind in a resilient trend

I hold Cairn India bought at Rs 324. Should I continue to hold this stock?

Devarajan

Cairn India (Rs 309): Cairn India has held its ground in the current bout of volatility. The stock is down only 3 per cent since the beginning of 2013. The stock continues to be in a structural uptrend despite the corrective move witnessed since March 2012. These long-term corrections are halting above key long-term support levels at Rs 280 and Rs 240.

Such long-drawn sideways move implies that the stock is building a base before launching the next leg of its long-term up-move. You can hold the stock with stop-loss at Rs 260.

Investors wishing to buy the stock can do so in declines with the same stop-loss. The stock could rise to Rs 350 or Rs 370 over the coming months. Target on a break above Rs 370 is its previous peak at Rs 401.

I hold some shares of GTL at the average cost of Rs 38. Should I sell this share despite the heavy loss or hold on for some time in the hope of a turnaround?

S.R. Acharyya

GTL (Rs 11): This stock is in a very strong downtrend and there is no point holding on to it. It has breached all long-term supports and currently trades at a life-time low. Even if there is a bounce back in the stock, it will need to move past the resistances at Rs 17 and Rs 20 before the short-term outlook turns conducive.

That said, the trend in short-, medium- as well as long-term is currently down in the stock. There are no signs of a turnaround and the stock could plumb lower depths, below Rs 10. You can, therefore, switch out of the stock at this juncture and invest the money in any fundamentally sound stock that can give better returns when the broader market reverses higher.

Can I invest in Sterlite Industries at current price?

S. Manikandan

Sterlite Industries (Rs 87): Sterlite is in a relentless slide since the top of Rs 232 recorded in January 2010. This slide has pulled the stock below its long-term trend-deciding level at Rs 120. It is now drawing close to the 2008-low at Rs 41. The stock etched a support zone in the region of Rs 50 and Rs 75. This is the zone that can be considered as a more reliable point from where a reversal is possible.

Investors with lower risk-taking ability can wait for decline to this zone before buying the stock with stop-loss at Rs 40. Those with higher risk appetite can buy the stock at current level with stop-loss below the recent low at Rs 68.

Medium-term hurdles are placed at Rs 120 and Rs 140. The second resistance level needs to be surpassed to indicate that the outlook for the stock is turning positive. Conversely inability to surpass these levels will imply that the stock is heading towards its 2008-lows. Resistances beyond Rs 140 are at Rs 160 and Rs 195.

I am holding Reliance Infra. What is the outlook for this stock?

K. Kasi Nathan

Reliance Infra (Rs 357): Reliance Infra is currently trading at its long-term support zone between Rs 300 and Rs 350. This zone supported the stock in 2008, 2011 and again multiple times this year. You can hold the stock with a stop-loss at Rs 280. If this level is breached, it will be hard to say where the next halt can be.

Key medium-term resistances will be at Rs 465, Rs 551 and Rs 700. Investors with medium-term investment horizon can exit the stock on bounce to either of these levels.

Long-term resistance band for the stock is in the zone between Rs 1,200 and Rs 1,400.

What is your advise about investing in Arvind after the current correction?

R.T. Rajasekaran

Arvind (Rs 76): Arvind has been quite resilient in the current correction. The uptrend that commenced in the stock from the 2009 low continues to be in force. Despite the stock being in a corrective phase since October 2011, this phase is making the stock move in a broad sideways zone between Rs 60 and Rs 110. This is conducive from a long-term perspective.

The stock has long-term supports at Rs 60 and then at Rs 49. Investors can buy the stock in declines with stop-loss at Rs 56.

Medium-term resistances are placed at Rs 80 and Rs 92. The long-term ceiling is at Rs 110, where the stock formed a double-top in 2011 and again in 2013. This level needs to be surpassed to pave the way for rise towards the stock’s life-time peak at Rs 142.

Please advise me on the prospects of Crisil. Can I buy the stock at these levels?

Subir Raybarman

Crisil (Rs 1,152): Crisil has been holding quite steady in the ongoing carnage, ruling close to its life-time high. The more adventurous can buy the stock at these levels with stop-loss at Rs 1,070. The more conservative can wait for the stock to record a strong close above Rs 1,200 before buying it.

Strong break above Rs 1,200 will mean that the stock is heading to a new high at Rs 1,310 or Rs 1,412. Medium-term view will turn adverse only on close below Rs 809.

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