Portfolio

Query Corner: Hindalco Industries in medium-term decline

Lokeshwarri S.K. | Updated on March 12, 2018 Published on April 28, 2012

Please advise on the outlook for Insecticides India and Dwarikesh Sugar Industries. Are these stocks worth holding?

P.K. Srivastava

Insecticides India (Rs 410): The graph of Insecticide India is very pleasing to the eye. It has been climbing up steadily marked by very shallow corrections. The long-term uptrend that began at December 2008 low continues to be strong. This positive structural trend will be threatened only if the stock goes on to close below Rs 275.

Medium-term supports for the stock exist at Rs 345 and Rs 292. Investors with a short- to medium-term perspective can continue to hold the stock as long as it trades above Rs 350. The stock will face resistance in the zone between Rs 400 and Rs 480 in the upcoming months.

Targets on a break above this band are Rs 515 and Rs 617.

Dwarikesh Sugar Industries (Rs 35.9): The stock is in a severe bear market since the February 2006 peak. While the intense downward spiral halted in November 2008, the stock is fluctuating in the range between Rs 28 and Rs 140 since then.

It will continue to face strong resistance around Rs 140 and the long-term outlook will turn positive only on a firm close above this level. Subsequent long-term targets are Rs 168 and Rs 200.

A fresh leg of the downtrend began at the November 2010 peak. The stock has now reached its long-term base level around Rs 28. Investors still holding on to the stock can continue to do so with stop at Rs 25. The stock will face resistance at Rs 68 and Rs 93 in the medium-term. Investors with short to medium-term investment horizon can divest their holdings at either of these levels.

Can I buy Hindalco and United Phosphorous at current levels?

Jayakumar

Hindalco Industries (Rs 119.8): Hindalco is in a medium-term correction from the peak of Rs 252 recorded in January 2011. This decline is correcting the up-move recorded in the stock from the March 2009 low. The stock is attempting to halt around its key long-term support at Rs 133. The zone between Rs 110 and Rs 120 is critical from a long-term perspective. Investors can buy the stock in declines with stop at Rs 105.

But fresh purchases should be avoided on decline below Rs 105. Next halt for the stock can be at Rs 68 or even Rs 37. Resistances for the stock over the upcoming months will be at Rs 165, Rs 180 and Rs 200. Investors with a shorter investment horizon can sell the stock at either of these levels.

Long-term view will turn positive only on close above Rs 200. Next target for the stock would be Rs 250.

United Phosphorous (Rs 113.7): United Phosphorus is also declining sharply since February. This decline has pulled the stock below its long-term support at Rs 129. It would be best if investors wait for the stock to move above Rs 128 and recording a strong close above this level before initiating fresh purchases on this counter.

The stock has feeble support at current levels, around Rs 110. But further decline will pull the stock lower to the long-term support zone between Rs 70 and Rs 80.

Medium-term targets for the stock are Rs 153, Rs 166 and Rs 180. Long-term view will turn positive only on close above Rs 180, opening the possibility of a rally to the previous peak at Rs 220.

The stock, however, has strong long-term resistance around Rs 220.

The stock could find it difficult to move beyond this hurdle just yet.

I have bought Kalindee Rail Niman and Rishi Laser at Rs 180 and Rs 64 respectively. Let me know the outlook for these stocks.

N. Gopalakrishnan

Kalindee Rail Nirman (Rs 68.7): Kalindee Rail Nirman is currently trading at a multi-year low. The stock has strong support in the zone between Rs 80 and Rs 90 where it bottomed in October 2008, March 2009 and April 2011. The stock is currently trading at Rs 74 that was the trough formed in July 2006.

Breach of this support can cause a steep fall that can drag the stock to the next long-term base between Rs 11 and Rs 32. Investors should, therefore, divest their holding on a steep decline below Rs 65.

Rallies in the upcoming months will face resistance at Rs 135 or Rs 176. Investors should divest their holding if the stock is unable to move past the first obstacle.

Rishi Laser (Rs 26.2): Rishi Laser too continues to be in the long-term downtrend that commenced from the bull-market peak in January 2008. The recovery in 2009 could help the stock retrace only one-third of the previous decline and the stock is once again moving towards its 2009 low.

Investors can hold the stock with stop at Rs 19. The stock could attempt to move higher to Rs 49, Rs 64 or Rs 89 in the medium-term. Investors with a short-term perspective can exit the stock if it fails to move beyond Rs 49. Long-term outlook will turn positive only on a strong close above Rs 90.

lokeshwarri_sk@thehindu.co.in

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