Market Strategy

Query Corner

Lokeshwarri S.K. | Updated on December 07, 2013 Published on December 07, 2013

Please let me know if I can purchase Coal India for the long term.

N. Raman

Coal India (Rs 289): Investors in Coal India have had a torrid time in 2013 with the stock falling to a new life-time low of Rs 238 in August. The pull-back from this trough fizzled out at the high of Rs 314.8 and the stock has once again turned volatile.

Investors who have a greater penchant for risk can buy the stock at current levels with a stop-loss at Rs 230. If this trough is breached, it is hard to say where the next halt can be.

Coal India also faces a strong resistance around Rs 310. It is quite likely that the stock spends some more months in the band between Rs 240 and Rs 310 before moving higher. Targets above Rs 310 are Rs 330 and Rs 355.

Please let me know the long-term prospects of Lakshmi Machine Works and MRF.

Ganesh M.S.

Lakshmi Machine Works (Rs 2,499): Lakshmi Machine Works is in a long-term structural uptrend since the first quarter of 2009. The stock has fared quite well in the market correction of 2011, halting above the key long-term trend deciding level of Rs 1,370. This is the stop-loss that investors with a long-term horizon should adhere to.

That said, the stock has strong long-term resistance in the zone between Rs 2,800 and Rs 2,900. Lakshmi Machine Works might be unable to weave the magic necessary to take it above this zone just yet. Investors with short- to medium-term perspective should, therefore, exit the stock if it struggles to move beyond this zone. That can result in the stock vacillating in the region between Rs 1,500 and Rs 2,800 for a few more months.

Targets on a strong break above Rs 2,900 are Rs 3,600 and Rs 4,000.

MRF (Rs 17,773): MRF was confined to the region below Rs 4,000 for most of the time prior to 2006. Despite the rally to Rs 8,955 in 2007, the ensuing crash brought the stock hurtling lower to Rs 1,523.9 by March 2009. But the stock has not looked back since then, gaining over 10-fold.

The long-term view for the stock will be threatened only if the stock closes below Rs 11,740. Subsequent supports are at Rs 9,752 and Rs 7,841. Investors should consider declines as buying opportunity as long as the stock trades above Rs 11,740.

Long-term target on move above Rs 18,000 is Rs 19,837.

I bought Elantas Beck for Rs 627 and Castrol for Rs 306. Kindly let me know the long-term outlook for these stocks.

Lingeswaran S.G.

Elantas Beck (Rs 469): Elantas Beck is in a severe structural downtrend since the April 2012 peak at Rs 2,600. There is no let-up in the downward pressure, though the stock is attempting to halt the slide around Rs 364. The first requirement to signal that the stock could be on the verge of reversing higher is a close above Rs 670. Inability to do so can drag the stock lower to Rs 150.

The long-term trend deciding level is quite a long way away at Rs 1,230. Investors who wish to play it safe can exit the stock at these levels and consider re-entry on a strong close above Rs 670.

Castrol (Rs 304): The long-term trend in Castrol is going quite strong. A fresh leg of the long-term up-move is in motion since the December 2011 trough of Rs 192. Despite the medium-term correction from the June 2013 peak of Rs 371, the stock is managing to hold above the key medium-term trend deciding level at Rs 280.

Investors can continue to hold the stock as long as it trades above this level. Reversal from here can take the stock higher to Rs 340 or Rs 370 in the months ahead. Target on a break above Rs 370 is Rs 400 and then Rs 470.

Supports on decline below Rs 280 are at Rs 261 and Rs 194.

Can you please tell me the technical trend of Finolex Cables bought at Rs 71.50?

Manoharan N.

Finolex Cables (Rs 76): Finolex Cables is in a long-term uptrend since the December 2011 low at Rs 21. But this up-move is part of a long-term trading range between Rs 20 and Rs 70, within which the stock is moving since 2009.

The stock has moved slightly above the upper ceiling of this long-term range. But this breakout is not emphatic enough. A reversal from these regions is possible that can drag the stock lower to Rs 56 or Rs 43.

If the stock manages to break above Rs 80, next long-term resistance is at Rs 90. Investors ought to take some money off the table if the stock is unable to clear this level effectively. Long-term trend in the stock will turn positive only if it records a weekly close above Rs 90.

I am holding Tata Elxsi. Please guide me on whether to hold it or sell it.

V.K. Divya

Tata Elxsi (Rs 314): If your investment horizon is short-term, it will be best to book profit at this point. Tata Elxsi has strong resistance around Rs 350. The stock reversed from this zone in June 2007 and again in November 2010. A sharp pull-back from this region can take the stock lower to Rs 273 or Rs 230 in the weeks ahead.

Again the sharp rise in the price over the past two weeks, from Rs 193 to Rs 344 also warrants caution. If you do not want to exit the stock now, you can hold with stop-loss at Rs 270. Stop-loss for long-term investors can be at Rs 230.

Lokeshwarri S.K.

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