Trading recommendations - May 22, 2005

Bajaj Auto - this 2 wheeler major was recommended since a fortnight as a strong buy and has performed as per our expectations. The scrip is trending higher with support coming on a long term 3 year old trendline. Technical traders will note the higher tops and bottoms formation of late and the oscillators in confirmation of the upmove. The relative is higher than the Nifty at 125 ( where 100 = base ) and still rising. Traded volumes are perking up too and that is an additional positive. Currently, the scrip trades at it's all time highs and that indicates extreme strength. We recommend a buy for the patient long term investor.

Your call of action -

• Investors / cash segment players - buy on minor declines to the 1180 and keep room for averaging till the 1080. Maintain a deep stop at the 1000 mark and expect to book profits at the 1500 + mark in a year.

• Aggressive F&O traders - buy the June futures ( quoting at Rs 22 discount to cash ) at 1185 levels and hold with a stop loss at the 1135 levels. Downward averaging maybe resorted to at 1150 - 1155 levels by traders with deep pockets / higher risk appetite. Expect to book profits above the 1275 levels in the medium term. Options players do not much of a choice due to liquidity issues.

• Derivatives contract size - Market lot = 200 shares. F&O margin = approx Rs 39,000  (subject to change daily )

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