PNB Housing Finance builds a strong base

The stock can move much higher on a break above ₹1,700

Here are answers to readers’ queries on the performance of their stock holdings.

I would like to invest In PNB Housing Finance. Please suggest a suitable level from a six-month to one-year horizon.

Ashish Pathrabe

PNB Housing Finance (₹1,631.8)

This stock has performed quite well since its listing in November 2016; it is currently up 88 per cent from its listing price. After hitting the peak of ₹1,693 in June this year, the stock has been moving sideways in the range between ₹1,400 and ₹1,700. Since this appears more like a time correction, it might not get very deep.

However, a decline below ₹1,400 can pull the stock to ₹1,356 or ₹1,140. You can buy the stock if it declines to these levels. If the stock continues to amble in the current range, you can accumulate at these levels with a stop loss at ₹1,100. The stock has the potential to move to ₹1,956or ₹2,300 on a break above ₹1,700.

I hold the shares of Ajantha Pharma. What is the long-term outlook? Should I hold or sell?

Chaluvai Venkata Narayana

Ajantha Pharma (₹1,192.2)

This stock is in a steep decline since the peak of ₹2,150 recorded in October 2016. This appears like a long-term structural decline that is retracing the entire up-move from the January 2012 low of ₹38.

This medium-term decline is halting after retracing 50 per cent of the prior move. Since the greater part of the fall is already done, you can hold the stock for the time being.

Next critical support is at ₹850. You need to exit the stock only if this level is breached. On the other hand, a bounce from this area will provide a buying opportunity.

Any reversal will face resistance at ₹1,500 and ₹1,750. The 1,750 level needs to be surpassed to indicate that the stock is on its way to a new high again.

I hold Ador Welding and The J&K Bank. What is the medium to long-term outlook for these stocks?


Ador Welding (₹402)

This old war-horse has had a chequered history. It had its moment in sun in the 1990s when it raced to ₹138. But it soon returned to the wilderness, mostly trading below ₹20 between 1997 and 2004. The bull run of 2006-07 took the stock to the dizzying height of ₹525, but the ensuing market crash made the stock decline to ₹89 by April 2009.

A long-term uptrend is once again unfolding from the low of ₹80 in September 2013. The rally from this low has been quite stable without too much volatility. You can hold the stock as long as it trades above ₹300. Declines to this level will also be an opportunity to accumulate the stock further. Supports below ₹300 are at ₹260 and ₹218.

But the consolidation in the zone between ₹250 and ₹350 in 2015 and 2016 has created a good base from which the stock can launch the next leg of its up-move. A break above the recent peak of 421 could take the stock towards its 2008 peak of ₹525.

J&K Bank (₹78.3)

This stock is in a severe long-term downtrend that has pulled it down from the peak of ₹200 in May 2014 to ₹58 by June 2016. It is currently attempting to stabilise itself in the band between ₹50 and ₹90 over the last one year.

You can hold the stock as long as it trades above ₹50. A fall below this level can pull the stock price lower to ₹40 or ₹21 over the long term. The long-term base for the stock is around ₹20.

The point of concern is the fact that the stock is not displaying any strength from a medium-term perspective. It faces psychological resistance at ₹100 and then at ₹110. A strong close above ₹110 is required to signal that the stock is out of the woods and on the way to sustainable recovery.

Subsequent targets are ₹128 and ₹145. The stock needs to close above ₹145 to signal that a long-term recovery is ensuing.

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