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Jul 04, 2011, 09.33 AM IST
Moneycontrol.com initiative Know Your Investment helps investors zero in on that perfect stock or sector pick.
This week, technical analyst Hitendra Vasudeo plays mentor to investors, explaining his views on various stocks and sector.
Below are the questions you asked us on our Facebook page :
Anshul Yadav (age: 19, CA student): Can I purchase shares of Infosys with a long-term horizon? I want to purchase 300 shares, what should my strategy be?
Vasudeo: For the long-term the stock will provide good returns. But as it is an index-based stock and we have a good view on Nifty/Sensex in long term, the stock should be able to provide good returns in long-term.
In short to medium term, we may continue to see volatility and swing of uptrend and down trend on daily chart. As your perspective is for long term, it would switch to monthly chart and employ average of 50 months average and 10 day average.
As per the 50 months average on the monthly chart, the long-term trend is up at this point. On the 10 months average scenario, the trend is down. The 50 months would account for about five year’s trend and 10 months average would account for just little less than one-year.
So, that suggests that medium-term trend is down and can turn up if the close is above Rs 3,037. The short-term chart suggests a minor uptrend. On the daily chart, trades below 200 day average coincide with 10 months average down trend.
The ideal long-term buying levels are Rs 2,600, Rs 2,270 and Rs 1,979. Whenever you get these levels accumulate the 300 shares, which you want to buy at each of these levels. Investment cannot be made every day or any time. In a year, you get one or two good opportunity to invest and accumulate at panic.
Generally, we have seen that if investor has capital then he wants to invest immediately irrespective of market. Keep a thumb rule: when market corrects by over 10% (index) only then look to accumulate in bits and pieces — largecap index based stocks. At that time, don’t read news and any other source of information, which may prevent you from accumulating.
Alternatively, use SIP mechanics to accumulate the stock if you feel that you may miss the move. Every month deploy some amount. You are interested in 300 shares and at current price of Rs 2,938. Your capital will be Rs 8,81,700; divide it by 12, so do SIP in stock of approx Rs 7,000 or 8,000 and forget it. No need to time it, but ideally, buying can be done on weaker news and weaker fundamental in stock like Infosys.
If Infosys collapses and does not recover, it will mean a market crash. But accumulate only at Rs 2600-2270-1979 or go for SIP. Short to medium term, it is "Sell" on any rise for the time being.
Suchaya P Kamath (age: 33 years, Investor): Can you advise on the prospects of MMTC and Reliance with a 1 year horizon? Why are they down inspite of sitting on so much cash? Secondly, can suggest a stock for a long term investment?
Vasudeo: The stock is in complete downtrend and nothing much consolation can be given. Resistance is at Rs 950 and Rs 1,004. If these resistances are crossed then we may see up trend coming into existence. We had indicated Reliance to exit at Rs 900. we saw today Reliance opening with gap tested Rs 900 and down to Rs 856 low.
Power Grid can be considered for long-term; slow and steady movement may be seen. At times may show underperformance against market because of its price behavior to remain sideways at times. The structure may weakness if the support of Rs 90 is violated.
Till Rs 90 is not violated, the stock can be on the radar to buy on decline with the objective to first move towards Rs 130-150 range. The target would be Rs 174 and Rs 223. If the support of Rs 90 is not violated the in next seven-eight months may test Rs 130-150 range at least.
Support of Rs 90 indirectly also means that it is stop loss as well. Buy in low and comfortable volumes as per ones own risk bearing capacity. In case of violation of Rs 90, you may not feel the pinch of underperformance or loss.
Tags: Infosys, Reliance, MMTC , Power Grid, Bharti Shipyard, ARSS Infra, Titan Industries, Reliance Capital, Sterlite Industries, Biocon, Punj Llyod, Maruti, Eicher Motors, DLF
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