I was collecting shares of Tech Mahindra. My average purchase price is INR 1208. I can stay invested for two or three years. Please suggest if I can accumulate more at lower levels. What are the prospects for this action?
Tech Mahindra (INR 1,126.55): The downward trend that has existed since January of this year seems to have ended. The bounce from the June low of INR 930.57 gives an early sign of a trend reversal. Importantly, the rebound from the June low occurred because of long-term trendline support. The resistance is now in the INR 1,170-1,210 region. A strong break above it will confirm a trend reversal. Failure to breach ₹1,210 may keep the stock in the ₹950-1,200 range for a few months.
After that, an eventual break above ₹1,200 will open the door for a rally to ₹1,900 in the next four-six quarters. You can accumulate at current levels and also at INR 980 if a dip is seen. Keep the stop-loss at INR 840. Move the stop-loss to ₹980 when the stock moves to ₹1300. Move the stop-loss further to ₹1,350 when the stock touches ₹1,650 on the upside. Exit the stock at INR 1,870.
I bought shares of Divi’s Laboratories for ₹722. What are the technical prospects for this action? Can I keep it long term?
Manoj K Bhatt
Divi’s Laboratories (INR 3,601.55): The stock has been in a strong decline since November 2021. Strong resistances are at £4,000 and £4,200. As long as the stock remains below ₹ 4,200, the downtrend will remain intact. The current support is INR 3,460. A decisive break below this support can take the stock further towards ₹2,900 and even ₹2,750. This may happen in the next three to six months. After that, a new part of the rally could begin. Since you bought the stock at a very low level, it is important to protect your profits at this time.
Instead of waiting for this stock to bounce back to INR 5,000 level again, it is better to exit and book profit at current levels. You can reinvest the proceeds from the sale of this stock in some other stock. You may consider buying Tech Mahindra as discussed in the previous query, which looks bullish from a long-term perspective.
I bought shares of IDFC First Bank. My average purchase price is INR 47.25. What are the long-term prospects for this action?
IDFC First Bank (INR 50.50): The downtrend that existed since March 2021 has been reversed. The stock touched a low of INR 28.95 in June and has rallied sharply since then. The rally from this low is strong. The current uptrend is likely to remain intact. Current support is 49 INR. Much lower and the next strong support is at INR 42. The current advance has the potential to target ₹ 60 and ₹ 64 in the next three months or so. If the stock manages to cross ₹64, the upside can extend to ₹69. Levels of ₹64 and ₹69 are strong resistances.
The stock has been struggling to break decisively above ₹69 for many years now. So, you may have to exit most of your funds when the stock moves towards that level. For now, keep the stop-loss at INR 41. Follow the stop-loss to ₹ 49 as soon as the stock moves to ₹ 56. Move the stop-loss further to ₹61 when the stock touches ₹64 on the upside. Exit 80% of your ownership at INR 68. Keep a balance to see if a break above INR 69 is happening or not. But keep a very tight stop-loss of ₹66 for the balance. In case the stock fails to reach ₹69 and turns lower, you have to exit it at ₹66.