QUERY CORNER - HDFC in sideways consolidation phase

Kindly discuss the long-term outlook of Hyderabad Industries and Unichem Laboratories.

Anil

Hyderabad Industries (Rs 399.6): This stock is in a structural downtrend since the peak of Rs 757 recorded in July 2010. This decline pulled the stock below the key long-term support at Rs 345. It, however, bottomed at Rs 255 and a medium-term uptrend is currently in progress.

This up-move will face resistance at Rs 450 and then at Rs 573 in the months ahead. Long-term view will turn positive on a strong close above Rs 573 and the next target would be the stock’s life-time peak at Rs 762.

Short-term supports for the stock are at Rs 324 and then at Rs 225. Long-term investors should divest their holding on a close below Rs 225. Next support is well below at the 2009 trough at Rs 100.

Unichem Laboratories (Rs 136.6): Unichem Laboratories is in a long-term downtrend since December 2010. This decline halted at the December 2011 low of Rs 101 and the stock is attempting to form a base in the zone between Rs 100 and Rs 150.

Investors with a long-term investment perspective can hold the stock with stop-loss at Rs 95. But it is hard to identify the next halt once the stock closes below this level. A slide to Rs 76 or even Rs 54 would then be possible.

Key medium-term resistance for the stock is at Rs 165. Inability to move beyond this level will result in the stock vacillating in the zone between Rs 100 and Rs 165 for a few more months. Medium-term targets on close above Rs 165 are Rs 185 and Rs 205.

Long-term ceiling will continue to be at Rs 270. It is possible that the stock may struggle to move beyond Rs 205 in the months ahead. Therefore, investors with short- to medium-term perspective should sell the stock at the resistance levels mentioned above.

I am holding Gujarat State Fertilizers & Chemicals purchased at Rs 465. Please give your outlook on this stock.

Sushil Santra

Gujarat State Fertilizers & Chemicals (Rs 369.1): This stock is in a strong structural uptrend since the trough of Rs 61 made in October 2008. This uptrend ended at Rs 504 in November 2011 and the stock is consolidating sideways since then.

This sideways move is resulting in the stock price vacillating in the band between Rs 320 and Rs 500. Investors can, therefore, hold the stock with stop-loss at Rs 315. The stock can also be bought in declines with the same stop-loss.

Rebound above this support can take the stock higher to Rs 500 or Rs 591 again over the long-term. But decline below Rs 320 will result in the stock falling to Rs 284 or Rs 232. Long-term view will turn overtly negative only on close below Rs 220.

I am holding HDFC stock bought at Rs 650 over the last one year. It is not breaking up or down. Please discuss the prospects of the stock.

Hari Chittakkadan

HDFC (Rs 673.1): The structural trend in HDFC continues to be up. The stock recorded a strong up-move since the trough of Rs 223 recorded in March 2009. One leg of this move halted at Rs 780 in September 2010 and the stock is consolidating sideways since then.

The positive in this sideways move is that the stock has retraced only one-third of its previous up-move so far, vacillating in the range between Rs 600 and Rs 750.

Investors should hold the stock with stop-loss at Rs 570 since the stock has strong support in the zone between Rs 570 and Rs 600. The stock can also be accumulated in declines with stop at Rs 565.

The stock will face resistance at Rs 740 and Rs 780 in the months ahead. But strong break above Rs 780 will result in the stock shooting higher to Rs 944 or Rs 1,157.

Long-term supports on move below Rs 570 are at Rs 500 and Rs 440.

Kindly advise me on VST Industries and Indiabulls Financials.

S Mallah

VST Industries (Rs 1,699.2): VST Industries has shot through the roof since the beginning of this calendar, almost doubling from Rs 1,056 to Rs 2,025. A short-term correction is, however, in motion currently that has pulled the stock lower to the key short-term support at Rs 1,658.

Further decline will result in the stock moving to Rs 1,540 or Rs 1,430 in the months ahead. Investors with short-term perspective can hold the stock as long as it trades above Rs 1,400. Medium-term supports will, however, be at Rs 1,327, Rs 1,110 and Rs 900.

Short-term resistance will be at Rs 2,025. Target on a break above this level will be Rs 2,235.

Indiabulls Financial Services (Rs 245.6): This stock was decimated in 2008 when it plummeted from Rs 1,028 to Rs 77. The recovery from this low was gradual and the stock continues to be in a long-term downtrend. The stock needs to record a weekly close above Rs 450 before the long-term outlook turns conducive for the stock.

Key medium-term resistance for the stock is at Rs 248. The stock is struggling to rise above this level since March. Reversal from here will once again result in the stock heading towards Rs 140 or Rs 120.

The stock needs to record a strong close above Rs 246 to indicate the possibility of the rally prolonging to Rs 350. Investors with short- to medium-term perspective should, therefore, exit their holdings if the stock fails to move beyond Rs 260.

COMMENT NOW