Hot or Not? Aviation companies flying low!

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.

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.

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.

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.

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.

The India Street Analyst Upgrades and Downgrades – Review

The India Street previously reviewed some stocks in India Street Analyst - India Stock Upgrades and Downgrades – Part 1 and India Street Stock Analyst upgrades and downgrades – Part 2. Let us analyze the current technical picture of these stocks and re-assess our ratings.

Following ratings are used to indicate the effectiveness of the trend:

««««« Strong

«««« Good

««« Medium

«« Moderate

« Mild

The effectiveness of the trend is arrived at after taking into account the retracements, momentum indicators, volume indicators and direction indicators.

The ratings are for medium term and these are based on weekly charts.

A red « means mildly bearish; green «« means moderately bullish.

Development Credit Bank:

We gave a bullish ««««« rating for this stock previously. At that time the stock was on the 4^th wave and as anticipated, it bounced back after hitting a low of 88.50. During the 5^th wave, it managed to break the previous high at 120.55 but did not close above it. This move was not supported by the volumes either,

as price increase was accompanied by declining volume (see chart). We can see a “doji” body with long upper shadow, meaning selling pressure at higher levels. It was followed by a red candle (bearish engulfing pattern) and another red candle as confirmation (three outside down pattern). Now the bearishness is confirmed and we modify our ratings to bearish ««. Moreover it has formed a “double top” in daily charts and a close below 88.50 would mean further bearishness in medium term.

Sical Logistics Limited:

We gave a bullish «««« rating last time. But the stock did not break its resistance at 301.35 on a weekly closing basis and a downtrend has started. It has just broken its 38.2% retracement at 242.75 and closed below it. This is perfectly alright, since a decline after a long first wave would be healthy one.

As such, this correction will be a good opportunity to enter the stock. When the uptrend resumes, the stock should be able to break its resistance and move upward. Though the stock is on a downtrend (watch the declining volumes) it is bullish for the medium term and we re-rate the stock as «««.

PSL Limited:

This stock has been chosen as a “long term pick” in my previous article 5 Reasons to be Bullish in the Long Run. It has declined slightly (about 13.5%) on weekly charts, however this correction is good for the long term outlook for the stock. We still maintain our bullish ««« rating on this stock.

Cadila Healthcare Limited:

We gave a bullish «««« rating for this stock. It declined from 387 to 340 in July but managed to bounce back after hitting the support trendline. A “bullish three inside up” pattern has been formed over the last 3 weeks, which confirms further uptrend. There is no change in rating for the stock as of now.

FDC Limited:

The stock failed to break its horizontal resistance at 34.50 on a close basis, though it achieved a high of 36.80 during the last week of June.

It has continuously declined since then; it has even managed to break its support at 29. So we revise the rating for the stock from ««« to «««.

Global Vectra Helicorp Limited:

A bearish three outside down pattern occurred in the stock after a strong consolidation pattern as shown below.

Though the support level is yet to be breached, it is likely to be tested. Since it has closed below 61.8% retracement and no bounce back occurred, we revise our rating from «««« to «.

S.Kumars Nationwide Limited:

It has formed an “ascending triangle breakout” as shown below.

The technical target of 113.20 has already been achieved by the stock when it made a high of 115.90 during first week of July. It has not broken the support trendline yet. Apparently, stock is in 4^th wave and a bullish engulfing pattern has been formed last week. If this could be confirmed by a positive close and green candle this week, stock is likely to resume its 5^th wave, the technical target for which will be around 132. We revise our rating from ««« to ««««.

India Street Stock Analyst upgrades and downgrades – Part 2

In this article let us review some stocks which are technically bullish. We will keep updating the ratings on a regular basis.

Following ratings are used to indicate the effectiveness of the trend:

««««« Strong

«««« Good

««« Medium

«« Moderate

« Weak

The effectiveness of the trend is arrived at after taking into account the retracements, momentum indicators, volume indicators and direction indicators.

The ratings are for medium term and these are based on weekly charts.

Cadila Healthcare Limited:

A very interesting “inverse head and shoulder pattern” has been formed in the weekly chart of Cadila Healthcare. This is a bullish sign. This stock made a high of 400 in May last year. Watch the steep fall down to 225.50 in early June 2006. This amounts to 44% loss from its high. It did touch a high of 385 during November 2006. But, it could not break its resistance. Now it has taken almost 8 months to form this inverse head and shoulder pattern. The stock has successfully broken the resistances at 365.90 as well as 385. Now we have to wait for a close above its all time high at 400. This is a good example of how stocks can bounce back sharply after being hit worst. The target for the stock is around 545.

Rating for this stock: ««««

FDC Limited:

Another example of a stock losing more than half of its value in a bull market. It recorded a high of 66 in December 2004. It made lows of 39.55 and 33.10 in May 2005 and July 2006 respectively. In the monthly charts, 61.8% retracement works out to 33.15. The stock broke this level too in February 2007 and even managed to close below it. It has bounced back since then. There is a very nice wave formation in the chart. Apparently, wave 3 is in progress. The resistance at 34.50 has been broken. Now the next resistances are at 41.30 and 46.95.

Rating for the stock: «««

Global Vectra Helicorp Limited:

This belongs to the aviation sector. From a low of 154.15 in November 2006 it went upto a high of 328.70 in February 2007. Again, it fell back to 178.05 in March 2007. After 14 weeks of consolidation phase, it has broken its short term resistance at 282.50 this week. It is likely to test its previous high soon. Looking at the strong consolidation pattern and break out it certainly seems to be a possibility.

Rating for the stock: ««««

S.Kumars Nationwide Limited:

This stock, along with JBF Industries and Bombay Rayon Fashions are the textile stocks that are moving up in a sector that is discarded by the market. Many popular textile stocks such as Bombay Dyeing, Raymond, Arvind Mill etc. are bearish. The stock has successfully broken its previous resistance at 84.40 in mid April 2007. However, the bears were into action immediately. A bearish engulfing pattern was formed and confirmed in weekly chart. This resulted in stock hitting a low of 73.50. One may see the similar pattern in February 2007. This month, it has once again broken its resistance at 87 and closed above it for three consecutive weeks on closing basis. Now the stock is likely to move up higher for target of 119.

Rating for the stock: «««

Additional Information:

We have been tracking Indiabulls Real Estate and mentioned here that it needs to close above 420. Today, on 25/06/07, it has closed at 426.25. Let us watch how the stock performs from now on.