Technical Query Corner: IDFC, Jyoti Structures, M and M Financial, power grid, Tata Steel, Wockhardt:: Business Line

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Please guide on the medium-term outlook for Power Grid and IDFC bought at Rs 107 and Rs 117 respectively recently?

Pankaj

Power Grid Corporation of India (Rs 104.2): Power Grid Corporation is in a sideways consolidation phase since June 2009. The stock is moving between Rs 92 and Rs 130 since then. Long-term trend in the stock is however up since the October 2008 low of Rs 51.5. Key support is at Rs 90 that occurs at 50 per cent retracement of the up-move from 2008 low.

Investors with medium-term perspective can hold the stock as long as it trades above this level. Support on decline below Rs 90 is at Rs 81. Long-term view on the stock will turn negative only on a strong close below this level.

If the stock manages to hold above Rs 90, it will imply that Power Grid can break higher to Rs 140 or Rs 170 over the next two years. The stock's life-time high at Rs 167 can serve as a ceiling over the ensuing years.

IDFC (Rs 124.9): IDFC has long-term resistance in the zone between Rs 220 and Rs 225. It reversed lower from this zone in January 2008 and again in November 2010. The decline from the November 2010 peak pulled the stock below its key long-term support at Rs 112. But it reversed higher from the low of Rs 90 in January this year.

This level can now serve as a support for long-term holdings. Investors ought to divest their holding on decline below this level since the next support is at Rs 75 and then Rs 44.

Key resistance levels that can thwart rallies in the upcoming months are at Rs 170 and then at Rs 220. The stock needs to break above Rs 250 to make the long-term view positive.

Please discuss the long-term outlook of Wockhardt.

Anil

Wockhardt (Rs 771.7): Wockhardt is one of the outperformers this year, the stock has gained more than 200 per cent from its January low of Rs 251. The stock surpassed its previous life-time high at Rs 562 in March this year. This level will now convert into a key support. In other words, investors with short- to medium-term perspective can hold the stock as long as it trades above Rs 550.

Next medium-term support will be at Rs 475. Key long-term support for the stock would be at Rs 251. Investors should, however, exercise caution in the zone between Rs 900 and Rs 1,000. The ongoing rally can face some hiccup in this region.

I have recently purchased Tata Steel at Rs 437. Should I hold this stock or book loss?

R.T. Namasivayam

Tata Steel (Rs 408.2): Tata Steel has key long-term support at Rs 372. Though the stock declined below this level in December, it did not fall too much below and formed the trough at Rs 332. Investors can hold the stock with stop-loss at Rs 330. If it manages to bounce off this level again in the ensuing weeks, that will form a double bottom from where it can move higher to Rs 490 or Rs 584.

Long-term resistance for the stock is, however, at Rs 740. The stock needs to record a strong weekly close beyond this hurdle to indicate the intention to move on to its life-time high at Rs 970.

Conversely, if the stock goes on to break its recent low at Rs 334, it will imply that the down-move from January 2011 peak is extending. Downward targets in that event would be at Rs 265 and Rs 148.

I am holding shares of Jyoti Structure bought at Rs 120. Please advise on the one-year outlook.

R. Binani

Jyoti Structure (Rs 37.6): Jyoti Structure could not recover completely from the strong bear market that began from its life-time high at Rs 328. The rebound from 2008 low could not take the stock beyond the key long-term resistance at Rs 208 and the stock is close to its 2008 low at Rs 56.

Investors can hold the stock only as long as it trades above Rs 30. Decline below this level can pull the stock to sub-Rs 10 level. Medium-term resistances will be Rs 98 and Rs 135. Medium-term view will turn positive only on close above Rs 135. Long-term view will stay under a cloud as long as the stock trades below Rs 210.

Kindly advise on the outlook for Mahindra and Mahindra Financial.

S. Mallah

Mahindra and Mahindra Financial Services (Rs 615): This stock etched a spectacular rally between August 2009 and November 2010. There were no meaningful corrections within this up-move and the stock gained over 300 per cent in this period. M&M Financial is, however, in a sideways consolidation phase since November 2010. This phase is making the stock vacillate in the band between Rs 600 and Rs 850 over the last two years.

Investors with long-term perspective can accumulate the stock every time it draws close to Rs 600, with stop at Rs 570. Fresh purchases are not recommended on close below Rs 570, since next supports are at Rs 500 and Rs 420.

Medium-term up-moves will face resistance at Rs 750 and Rs 850. If the stock manages to record a strong weekly close above Rs 850, it will mean that the long-term uptrend has resumed. Subsequent targets for the stock would be Rs 995 and then Rs 1,240. Investors can consider increasing their holdings in this stock on a strong break above Rs 850.