Wednesday, February 23, 2011 Trading strategy for 3 buzzing stocks

In an exclusive interview with, Prashanth Tapse, Sr. Research Analyst, Mehta Equities gave views on 3 buzzing stocks on Feb. 22, 2011. The same are as follows:

Videocon Industries

Prashanth Tapse: The stock extended its three-day losing streak after the CBI questioned group chairman Venugopal Dhoot and his brother Rajkumar Dhoot as part of its ongoing investigations in connection with the 2G spectrum scam. The investigation was about funding and transactions of Datacom Services, one of the nine companies which was allocated spectrum in 2008. The above cross verification is an on going process activity by CBI. Since the requirement of the requisite amount of the paid-up capital was an important eligibility criterion, their applications ought to have been rejected. Many executives and business leaders have been questioned by the CBI over the past few weeks. They include Anil Ambani, the boss of ADAG, Prashant Ruia of Essar and Sanjay Chandra of Unitech.

Technically the stock is under selling pressure with ongoing telecom saga and hence, it is better to avoid this stock while any run-up in the stock could be used as exit option wherein Rs 185 act as crucial level to look at if this breaks it can test Rs 160.

Idea Cellular

Prashanth Tapse: The counter reacted sharply to the news reports saying that Additional Solicitor General (ASG) of India has held Idea Cellular in violation of merger and acquisition norms and suggested stringent penalties, including Rs 3 billion fine and cancellation of 3G spectrum licences in four circles and 2G licences in six circles. The proposed penalty is related to the alleged violation of merger and acquisition norms when the Aditya Birla Group Company bought an equity stake in Spice Telecommunication in 2008. Idea Cellular and Spice have violated the lock-in period clause that stipulates that a company cannot enter into an agreement for merger before three years from the effective date of licence. However, Idea has denied any breach of M&A norms. The company has said the company`s merger with Spice Communications was approved by court and consummated with the full knowledge of the Department of Telecom. Technically we are positive on the counter hence we recommend traders to `Accumulate` around Rs 53-59 for a medium target of Rs 70 -75 from the current levels.

Reliance Industries

Prashanth Tapse: The company stands out to be the star of the day as investors cheered the news that British energy giant BP will pay as much as USD 9 billion for a 30% stake in oil and natural-gas assets controlled by Reliance Industries. BP and Reliance will also set up a 50-50 joint venture to market natural gas. The transaction will give Reliance access to BP`s expertise in deep-water drilling to expand production. The entry of an experienced and technologically advanced player like BP reinforces the potential of KG basin gas production in the long term. After years of underperformance, investors at Reliance will be wondering if their patience will finally be rewarded. Reliance sharply outperformed the benchmark Sensex which has 11.70% weight in the Sensex, up 4.10% at Rs 995.50, while the benchmark index was down 0.70%.

Technically we expect the stock to consolidate at Rs 930-970 levels before taking any fresh move. We advice traders to hold with a target of Rs 1,105 for medium term.

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