Hot or Not? Ambanis on a dream run!

Sundaramurthy Vadivelu

Disclosure Please click on the above link to view the disclosure document before reading this article. The contents may not be reproduced in any form without obtaining prior permission from the publisher. Please send your feedback

The Ambanis: Anil, Dhirubhai and Mukesh

Dhirajlal Hirachand Ambani (28 December 1932 - 6 July 2002), was instrumental in bringing first time Indian investors to stock market. After working in Gulf as dispatch clerk, he returned to India to start Reliance Commercial Corporation with an investment of Rs.15,000. It was engaged in polyster yarn import.

He started a textile mill at Naroda, Ahmedabad to manufacture textiles using polyester fibre yarn. He implemented backward integration philosophy and a petrochemical complex at Patalganga in Maharashtra was set up to produce polyesters, intermediates and petrochemicals. Reliance established another petrochemical complex at Hazira near Surat in Gujarat to manufacture ethylene, propylene, ethylene glycols, polymers like polypropylene, polyvinyl chloride, polyester intermediates like pure terephthalic acid, polyester filament yarn etc.

His dream project, of course, was a grass root refinery. The 27 million metric ton grassroot refinery at Jamnagar, Gujarat came up in 1999. Reliance has diversified into power, telecom, infrastructure, capital markets, insurance, logistics, retail etc.

At the time of Dhirubhai’s demise, Reliance Group had a gross turnover of Rs. 75,000 crore. This was 1000 times its 1976 – 77 turnover of Rs.70 crore.

Reliance came out with their first IPO in 1977 and Dhirubhai convinced people in rural Gujarat that his company would yield substantial returns to shareholders. This happened at a time when the awareness among public about stock markets was minimum.

Have his sons, Mukesh and Anil, lived up to Dhirubhai’s repuations? The answer is a big YES, as can be seen from the tables below.

Mukesh Ambani Group Companies’ Performance:

Scrip	3 month return	1 year return	5 year return
IPCL	34	50	621
RELIANCE	38	104	822
RIIL	140	138	3,542
RPL	74	150	NA

Anil Ambani Group Companies’ Performance:

Scrip	3 month return	1 year return	5 year return
RCOM	17	72	NA
REL	85	137	396
RELCAPITAL	45	196	3,370
RNRL	167	307	NA

For details about close prices on various dates, please click here.

In the last 1 year, IPCL and RCOM have gained more than 50%; All other companies have gained more than 100%. In the last five years (After Dhirubhai’s demise) RELCAPITAL and RIIL have got multiplied by more than 30 times; REL, IPCL and RELIANCE have gained more than 4, 6 and 8 times respectively.

Dhirubhai is no more; but his dreams have become true. Those who had faith in him and his companies have been thoroughly rewarded.

Let us now analyze some of the medium term charts of these companies.

In late 2004, the media reported that there was some dispute among Ambani brothers regarding ownership of group companies. The Hindu Businessline dated November 30, 2004 read:

“THE Ambani controversy was today stoked further with the despatch of another e-mail to the employees of Reliance Industries Limited, this time by the Vice-Chairman, Mr Anil Ambani, obliquely emphasising the brothers' equal status in the corporate group.

… This is the third email to the employees from the Ambani brothers. The first one was from Mr Mukesh Ambani last week, telling his employees that the Chairman and Managing Director (who is himself) is the final authority at Reliance…”

What did this mean to the stock market? See the chart below.

http://groups.google.com/group/theindiastreet/web/RELIANCE_W_150705.jpg

The weekly chart of Reliance indicates that on November 5, 2004 the stock closed at 540.35. On June 10, 2005 it closed at 566.55.

Between November 5, 2004 and December 17. 2004, the Nifty gained 160 points whereas Reliance lost 59.80 rupees, indicating the market was not quite certain about the stock. Reliance is known to perform very much in line with both Sensex and Nifty due to its weightage. But during this period it was not so.

Finally, after the accord was reached between the brothers, the stock managed to break its resistance at 650 during the week ending June 24, 2005. Technically, a “three inside up” bullish candlestick pattern was formed during first week of June. There was a huge upward gap when the resistance was broken.

The Tribune reported on June 19, 2005 about the accord as follows:

“India’s biggest industrial conglomerate, Reliance Industries Limited, will finally be split up between Mukesh Ambani and his younger brother, Anil, thereby ending a seven-month war between the two.

Kokilaben Ambani, their mother and widow of Reliance Industries Limited founder Dhirubhai, announced the broad contours of the settlement in a statement released here today.”

All the companies mentioned above are currently trading at lifetime highs. There have been no reversal signals on any of the medium term charts. But it is better two book profits in RIIL and RNRL, since both have appreciated very sharply in the last one week or so.

Reliance Industrial Infrastructure Limited

(Group: B1, Scrip Code: 523445):

http://groups.google.com/group/theindiastreet/web/RIIL_W_250907.jpg

The stock formed a false “head and shoulder” pattern between January 2006 and March 2007. False, because, the neckline support was not broken; Volumes were increasing as right shoulder was formed. Between May and June 2006, stock had fallen from a high of 951.70 to a low of 357.40. A bullish three inside up candlestick pattern was formed during the week ending September 7, 2007. From a close of 498 it has appreciated to 1149 (131%) in just about 11 trading sessions. It is extremely overbought in daily charts as well. So profit booking may be considered in this counter.

Reliance Natural Resources Limited (Group: B1; Scrip Code: 532709):

http://groups.google.com/group/theindiastreet/web/RNRL_W_250907.jpg

This stock made a high of 41.65 in March 2006. It had broken this resistance during the week ending July 20, 2007. However, in the last six trading sessions the stock has already gained 84%. It is quite an unusual movement since no major price rise was observed for almost 2 months after the breakout. Profit booking may be considered in the stock for the medium term.

As mentioned earlier, we need to wait for a confirmation of trend reversal for these stocks. But short term investors may avoid these stocks due to overbought conditions and a reversal is expected anytime.

Sundaramurthy Vadivelu

Suggested Reading

Hot or Not? Automobile Sector on a slippery road! Hot or Not? Private sector banks on a roll! Hot or Not? Aviation companies flying low! Hot or Not? Shipping companies sailing smoothly!

Hot or Not? Shipping companies sailing smoothly!

Sundaramurthy Vadivelu

Disclosure Please click on the above link to view the disclosure document before reading this article. The contents may not be reproduced in any form without obtaining prior permission from the publisher. Please send your feedback

Introduction:

With the advent of civil aviation, the contribution of the shipping companies in passenger transport has become negligible. For example, about 1,200 passengers travelled from Chennai Sea Port to Port Blair (Andaman & Nicobar Islands) every week in the year 2004. This is very negligible when compared to rail transport or air transport. However, shipping companies carry heavy cargo, including dangerous and inflammable liquids like crude oil. This is not possible by air transport.

In our previous “Hot or Not?” articles we discussed about Indian automobile and aviation stocks. In this article let us discuss about shipping companies.

Listed companies in India:

At NSE, following shipping companies are listed:

• ABG Shipyard

• Bharti Shipyard

• Great Eastern Shipping

• Great Offshore

• Mercator Linings

• Shipping Corporation of India

• Shreyas Shipping & Logistics

• South East Asia Marine & Construction

• Varun Shipping

Of these, Mercator Linings belongs to ‘S’ group of BSE; Shreyas Shipping belongs to ‘B2’ group. We discuss the rest of the stocks.

Great Eastern Shipping’s offshore business was demerged in 2006 and Great Offshore was formed. Accordingly, for every 5 shares of GE Shipping held on record date, 1 share of Great Offshore was allotted. This was done by deducting Rs.2 from face value of Rs.10 of GE shipping. 5 shares of Great Offshore with face value Rs.2 were consolidated to form 1 share of face value Rs.10; similarly 5 shares of GE shipping with face value of Rs.8 were consolidated to form 4 shares of face value Rs.10.

Because of this demerger, GE Shipping was relisted in November 2006.

The following table lists percentage loss these stocks witnessed during the huge correction in May and June 2006.

Scrip	% fall May ‘06	% fall June ‘06
BHARTISHIP	22.87	17.30
SCI	13.93	0.15
SEAMECLTD	1.37	25.46
VARUNSHIP	0.24	16.53
NIFTY	13.68	1.86

It can be seen that, except Bharati Shipyard, the other companies did not lose much compared to Nifty in May 2006.

The performance of the shipping companies can be found here. This table gives details about close prices on various dates, P/E ratios, book values etc.

After the correction, the stocks have gained reasonably, as shown in the following table:

Scrip	3 month % gain	6 month % gain
ABGSHIP	45.17	67.01
BHARTISHIP	15.84	59.55
GESHIP	14.30	69.92
GTOFFSHORE	8.44	69.37
SCI	0.53	24.76
SEAMECLTD	17.85	25.45
VARUNSHIP	17.71	20.67

NONE of the shipping stocks returned negative results in the last 6 months.

Bharti Shipyard:

Bharati Shipyard’s monthly chart shows that the stock had completed its 2^nd wave (corrective decline). It is still bullish for the long term, as can be seen below.

http://groups.google.com/group/theindiastreet/web/BHARTISHIP_M_120907.jpg

This stock went up from a low of 108.80 to a high of 528 or or by 485%. After a year’s consolidation, it has broken out in July 2007, but without much volumes. It just implies that further uptrend may not be as strong as the previous one. Nevertheless, the stock is likely to move up from these levels; For the long term investors, 854 should be the target.

GE Shipping:

This stock too, is bullish in medium term chart. It appears to have completed wave 2 as it has already closed above 61.8% retracement. A weekly close above 369 with good volumes will ensure an upside breakout. The stock may be expected to achieve a target of 597.

Great Offshore:

The stock is in consolidation pattern, with a possible upside breakout. When that happens, it will be a confirmation of “bullish flag” pattern. See my earlier article “Top 10 Hot India Stocks for July 2007” in which we discussed about this pattern with the daily chart of Evenix Accessories Limited. So medium term investors can stay invested in the stock.

Shipping Corporation of India:

http://groups.google.com/group/theindiastreet/web/SCI_W_120907.jpg

The stock had broken out in February 2007 as can be seen in the chart. In the last few months it has formed two lower highs and lower lows; but it can be seen that the stock has not yet closed below the support trendline even once. This is an indication that the stock is still bullish. Also, at support levels, a bullish “three outside up” candlestick pattern has been formed. This is yet another confirmation of bullishness. The stock can be expected to touch 291 in the medium term.

South East Asia Marine & Construction:

This stock has had a “rising channel” pattern in the weekly charts as shown below.

http://groups.google.com/group/theindiastreet/web/SEAMECLTD_W_120907.jpg

The prices fluctuate between two parallel trendlines which have positive slopes (moving upwards). The stock will continue channeling upwards until it is able to break either the upper or lower trend line. An upside break is bullish, while a downside break is bearish. There is no downside breakout yet, and we have to look for a confirmation on the upside.

Varun Shipping Company:

This is the only stock that is yet to encounter a resistance breakout in the medium term charts. It has made higher highs and higher lows; prices have penetrated the resistance trendline; but the stock has failed to close above the resistance line.

http://groups.google.com/group/theindiastreet/web/VARUNSHIP_W_120907.jpg

The stock had fallen from a high of 99 in May 2006 to a low of 49.40 in March 2007 (50% fall when the Nifty gained about 25% during this period!). Higher highs and higher lows have been formed, indicating the stock is bullish; but the stock failed to break its resistance at 68.30 on weekly close basis. But it is still bullish in medium term charts.

Conclusion:

All the seven stocks discussed above are good for investment from a medium term perspective.

Sundaramurthy Vadivelu

Suggested Reading

Hot or Not? Automobile Sector on a slippery road! Hot or Not? Private sector banks on a roll! Hot or Not? Aviation companies flying low! Selling Naked Puts - We Bare All

Hot or Not? Aviation companies flying low!

By Sundaramurthy Vadivelu

Disclosure

In India, air travel is slowly becoming popular among people. About 1000 Indians who are accustomed to air travel perform nearly 20 trips in a year as against 60 in China and 2300 in United States. This reveals that aviation has not made much penetration amongst Indians.

Before 1990s the domestic sector was controlled by Air India and Indian Airlines (both state owned). After opening the Indian airpsace to private operators, several aviation companies have entered the market. Some of the airlines operating in the ‘90s are non existent today, like East West Airlines, Modiluft, NEPC etc. There are many private airlines in India of which only 3 are listed at NSE viz. Jet Airways, Deccan Aviation (Air Deccan) and Global Vectra Helicorp. First two offer passenger services using traditional aircraft while Global Vectra offers helicopter services.

The following table shows the percentage gains for these three stocks in the last one year.

Scrip	1 month	3 month	1 year
AIRDECCAN	1.07	20.79	72.81
GLOBALVECT	0.81	(8.04)	6.75
JETAIRWAYS	12.96	38.23	54.53

The following chart shows the prices of the scrips on various dates.

http://groups.google.com/group/theindiastreet/web/AVIATION_ONE_YEAR_040907.jpg

The following table shows the IPO price, highest close till date and fall from highest close.

Scrip	IPO price	Highest Close	% Fall from HC
AIRDECCAN	148	159.15	(10.74)
GLOBALVECT	185	318.5	(37.16)
JETAIRWAYS	1100	1375	(39.65)

It can be seen that though Air Deccan has lost 10.74% from its highest close, it has gained 72.81% in the last 1 year. Importantly, it declared a LOSS of Rs.213 crores for the financial year ending March 2007. The primary reason for the stock’s gain was Mr Vijay Mallya, who runs another airline company Kingfisher Airlines took 26% stake.

Global Vectra Helicorp has gained only 6.75% for the last 1 year. Interestingly, this company has declared a net PROFIT of Rs.12.5 crores for the financial year 2006 - 2007. But it has lost 37% from its highest close.

Jet Airways declared a net profit of Rs.28 crores for 2006 – 07 compared to Rs.452 crores for the previous year 2005 – 06. Despite a huge slump in net profits, the stock has managed to gain 55% in the last 1 year. It acquired Air Sahara, another private airline.

These statistics clearly indicate that the market expectations were completely different.

Let us now discuss the medium term charts of all the three stocks.

http://groups.google.com/group/theindiastreet/web/AIRDECCAN_W_040907.jpg

The stock closed below its 61.8% retracement at 101.65 for four weeks in a row. After it bounced back, though it could break its previous high at 162.90 it did not close above it. For the last 3 months, the stock is fluctuating in the 130 – 150 range. It is still bullish, as higher highs and higher lows have been formed. But it may take a while for the stock to break its previous resistance. The subdued volumes in the daily chart suggests that a breakout is unlikely at the moment. So taking fresh positions is not ideal now.

http://groups.google.com/group/theindiastreet/web/GLOBALVECT_W_040907.jpg

This stock had almost fallen back to its support level at 154.15. A bearish “Three outside down” pattern had been formed in early July. Note that the support trendline has been broken and stock has closed below it for 6 weeks in a row. Though the stock may recover slightly due to technical rallies, fresh buying in the stock cannot be contemplated now.

http://groups.google.com/group/theindiastreet/web/JETAIRWAYS_W_040907.jpg

The technical scenario for Jet Airways is a tricky one. It also had broken its support trendline and closed below it during March 2007. It has bounced back from a low of 533 to a high of 970 but when it broke previous resistance at 805 it ended the week with a red candle and volumes were not great either. The high 970 made during the next week was not sustainable and stock is just testing its support levels. Unless it closes above 970 with good volumes in medium term charts, one may not take a long position in the stock.

Conclusion:

The medium term charts of the three stocks do not favour investment now. One may consider new exposures after reassessing the technicals later.

Sundaramurthy Vadivelu

Suggested Reading

Hot or Not? Automobile Sector on a slippery road! Hot or Not? Private sector banks on a roll! VIDEO: India vs China - Which is Better?

Hot or Not? Private sector banks on a roll!

By Sundaramurthy Vadivelu

Disclosure

The banking system in India is more than 200 years old. The General Bank of India was founded in 1786 (now defunct) was the first ever bank in India. The oldest surviving bank in the country is State Bank of India (SBI), which was established as “The Bank of Bengal” in 1806. Subsequently more banks were in operation, like Allahabad Bank, Punjab National Bank, Bank of India etc.

After India’s independence, the larger commercial banks were nationalized in 1960s to enable the government in controlling credit delivery. By 1995, the liberalization policy of the government allowed private sector participation in banking industry. This was followed by foreign direct investment (FDI) in banks. As of now, there are 28 public sector banks (with Government of India holding a stake), 29 private banks (without Government stake but listed in stock exchanges), 31 foreign banks and plenty of medium and small co-operative banks. The Reserve Bank of India (RBI) is India’s central bank and it is the ultimate authority for control of banking operations.

At both BSE and NSE, several public sector banks (State Bank of India, Punjab National Bank, Indian Bank etc.) as well as private sector banks (ICICI Bank, HDFC Bank, Kotak Bank etc.) are listed.

Let us now discuss the financial and stock performances of some listed private sector banks. Bank of Rajasthan is listed under ‘T’ group in BSE and is not included here.

The following table shows 6 month, one year and 5 year percentage return of these stocks.

For detailed information about close prices on various dates, please click here.

Scrip	6 month return	1 year return	5 year return
AXISBANK	18	68	1,489
CENTBOP	5	58	336
CUB	15	60	610
DCB	45	113	113
DHANBANK	25	196	158
FEDERALBNK	42	71	1,128
HDFCBANK	15	32	434
ICICIBANK	1	50	532
INDUSINDBK	10	16	222
INGVYSYABK	39	83	155
J&KBANK	6	69	658
KARURVYSYA	16	47	367
KOTAKBANK	56	120	1,903
KTKBANK	1	60	413
LAKSHVILAS	7	52	277
SOUTHBANK	36	93	287
YESBANK	14	99	183

It can be seen that NONE of the private sector banks have yielded negative returns in the last 6 months. Axis Bank, Federal Bank and Kotak Bank have appreciated more than 10 times in the last 5 years. Dhanalakshmi Bank, Development Credit Bank, Kotak Bank and Yes Bank have doubled in the last one year.

Bank Nifty (NSE) and Bankex (BSE):

The private sector banks in Bank Nifty and their weightages are given below:

Scrip	Weightage %
HDFC Bank	12.35
ICICI Bank	28.78
Kotak Bank	6.44
Axis Bank	5.52

The private sector banks in BSE Bankex and their weightages are as follows:

Scrip	Weightage %
ICICI Bank	41.91
HDFC Bank	13.35
Axis Bank	5.96
Kotak Bank	4.48
Centurion Bank of Punjab	1.62
Federal Bank	1.23
Karnataka Bank	0.96
Yes Bank	0.65

This amounts to weightages of 53% and 70% for private sector banks in Bank Nifty and BSE Bankex respectively.

Let us now analyze the medium term outlook for Bank Nifty.

http://groups.google.com/group/theindiastreet/web/BANKNIFTY_WEEKLY.jpg

In the weekly chart displayed above, the BANKNIFTY is currently on a corrective decline (wave 4) from a peak of 7209. The first wave had a retracement of 193% i.e. 3414 to 6596. According to Elliott wave theory, the previous high should act as a support when the stock corrects during the five wave pattern. It can be seen in the above chart that it was exactly the case. Bank Nifty managed to close below its previous high of 5074 once and it had bounced back. Similarly the previous high at 6596 should act as a support for the current decline, though it has managed to close below it on two occasions. The Bank Nifty should reverse in all probability soon. The target, when calculated from a low of 4837, works out to 7826 which is a good 1350 points away.

The monthly chart of BSE Bankex is shown below. (Chart courtesy: BSE web site www.bseindia.com)

http://groups.google.com/group/theindiastreet/web/BANKEX_MONTHLY.jpg

There are no reversal signs in the long term chart of Bankex either. The Bankex too, is bullish now. The long term target for BSE Bankex works out to 9784 when calculated from a low of 6047.

Let us now compare two major private sector banks, HDFC Bank and ICICI Bank in terms of Financial performance in the last few years.

http://groups.google.com/group/theindiastreet/web/HDFC_Bank_Performance.jpg

The two banks have performed consistently. HDFC Bank’s income though, is about 1/3 rd of ICICI Bank’s.

http://groups.google.com/group/theindiastreet/web/ICICI_Bank_Performance.jpg

Medium term out look for private sector banks:

We discussed about ICICI Bank in my previous article “5 India stocks to avoid (medium term perspective)”. A “double top” formation in weekly chart means that the stock will struggle to cross its previous high at 1010. The only encouraging factor though, is that it has still not closed below 791 which is its previous low. So, unless we get a confirmation of bullishness we cannot possibly look for investment opportunities in this stock.

Development Credit Bank (DCB) has not broken its previous resistance at 120.55 on a weekly close basis. It has lost about 14% from its highest close and still there is no sign of any reversal on the upper side. Read more about this stock in “The India Street Analyst Upgrades and Downgrades – Review”.

Indus Ind Bank (see weekly chart below), has not broken its resistance at 64. This stock is looking slightly weak in the sector.

The other private sector bank stocks are bullish in medium term charts, though some have lost more than 20% from their highest close. The trendline supports hold well in these charts; there are no major reversal patterns or candlestick patterns either. So we have to conclude that these stocks would be heading for higher levels.

http://groups.google.com/group/theindiastreet/web/INDUSINDBK_WEEKLY.jpg

Indus Ind Bank, as shown above, is struggling to break its previous resistance at 64. But it is forming higher highs and higher lows though.

Conclusion:

Except for ICICI Bank, DCB and Indus Ind Bank, the rest of the private sector banks remain bullish; Medium term investors can hold these stocks for some more time.

Sundaramurthy Vadivelu

Suggested Reading

Chart Patterns and market’s reaction Hot or Not? Automobile Sector on a slippery road! India Stock Market – Weekly Review Indices appear to have bottomed out! Top 5 India Banks ranked by Online Traffic

Hot or Not? Automobile Sector on a slippery road!

By Sundaramurthy Vadivelu

Disclosure

It is a well known fact that automobiles form an integral part of every economy. Automobiles are very essential for the movement of men and material. In India, automobile industry has come up a long way. 25 years ago, only upper middle class people could afford to have a motor cycle and rich people could possibly have a car (only a few models existed however). Today, the scenario has changed and even middle class families own a car. Let us now analyze the automobile sector from the stock market point of view. We will discuss the BSE Auto Index as well as some popular stocks.

The BSE Auto Index:

The BSE Auto Index has a free float market capitalization of Rs.81,458 crores and 17 constituent stocks. Bajaj Auto (weightage: 17.91%), Tata Motors (17.57%), Mahindra & Mahindra (also known as M&M, 15.19%), Maruti (12.24%), Hero Honda (7.67) are the top 5 in terms of weightage. It may be noted here that these stocks are also constituents of Nifty.

In the weekly chart displayed below, a “double top” formation can be observed. During May 2006 the auto index reached a high of 5844. Within about one month, it fell to a low of 3960. In February 2007 it once again made a high of 5882 but could not close above its previous high. Between May and July this year, a similar double top pattern was formed and the index has broken its support as can be seen from the chart. These indicate that the Auto Index is bearish. The next supports are at 4073 and 3960.

Chart Courtesy : BSE Web site, www.bseindia.com

Top Auto stocks:

See Recent Performance of India Automobile Stocks

These can be classified into 4 categories viz.

• 2 and 3 wheelers (Bajaj Auto, Hero Honda, TVS Motor etc.)

• Light Commercial Vehicles (LCV) and Heavy Commercial Vehicles (HCV - Ashok Leyland, Tata Motors etc.)

• Passenger cars (Hindustan Motors, Maruti Udyog)

• Tractors (Escorts, Punjab Tractors etc.)

Two and Three wheelers:

Scrip	5 year return %	Recent Loss %
Bajaj Auto	402.36	(33.16)
Hero Honda	122.87	(31.66)
LML	(63.90)	(79.94)
Maha. Scooter	269.97	(41.23)
TVS Motor	23.89	(68.35)

LCV’s / HCV’s:

Scrip	5 year return %	Recent Loss %
Ashok Leyland	244.97	(33.65)
Eicher Motors	359.27	(17.90)
Swaraj Mazda	334.38	(28.37)
Tata Motors	371.84	(35.70)

Passenger Cars:

Scrip	5 year return %	Recent Loss %
Hindustan Motors	208.64	(57.45)
Maruti Udyog	236.70	(21.88)

Tractors:

Scrip	5 year return %	Recent Loss %
ESCORTS	51.29	(46.39)
HMT	127.38	(44.11)
M&M	1,268.71	(37.69)
PUNJABTRAC	56.31	(32.07)

For more detailed information on prices and returns please See Recent Performance of India Automobile Stocks

Possible causes of the weakness in automobile sector:

• Increased interest rates

• Excess inventories

• Increasing competition

Mahindra & Mahindra, TVS Motors, Punjab Tractors, Hero Honda and Bajaj Auto showed decline in their earnings during fourth quarter for financial year 2006 – 07 whereas Ashok Leyland and Maruti Udyog had more earnings than the previous quarter.

Let us now discuss the long term outlook for some important stocks.

Ashok Leyland:

The monthly chart of the stock is displayed above. Using Elliott wave theory, we can come to the conclusion that waves 1 through 5 are already over; corrective wave ‘a’ and pullback wave ‘b’ are also complete. Now the last leg of correction is in progress. The stock is on the verge of testing its 38.2% retracement levels. A bearish “three outside down” candlestick pattern has been formed. If 34.50 is breached on a monthly basis, we can expect a bearish target of 22.90 in the long term.

Eicher Motors:

As can be seen in the chart above, the stock is locked between 202 and 415 for almost 2 years now. Only a decisive monthly close above 415 with good volumes will move the stock further upwards. But a close below 202 will make the stock bearish.

Tata Motors:

Like Ashok Leyland, this stock is also in wave ‘c’. If it closes below 637 in monthly charts, it may have a bearish target of 415 in the long term. Note that the volumes were maximum during wave 3 in 2003.

Hot or Not Conclusion:

Long term investors can exit the automobile sector at every higher level. Medium term and short term trends are weak; so it is better to avoid these stocks. Day traders/future traders however, may go either way depending on intraday charts.

• Long Term Investors – Hot

• Medium Term – Not

• Short Term – Not

Sundaramurthy Vadivelu