Larsen and Toubro

Larsen and Toubro ( weekly, 3 years)

I have been away from my blog for a while. Reasons are other commitments and nothing much significant to write about. We have discussed issues like corruption in high places, poor governance as major threats to Indian equity markets. Those emerged in the past two months and markets corrected significantly. I am always happy when markets correct because that is when value emerges. Our all time favourites like HDFC, L&T, HDFC Bank and SBI have not corrected much in the carnage. Max to about 10 percent or so.
Corporates with good governance record and investor friendly attitude are likely to be favourites for deep pocket investors. As sentiment changes these scrips are likely to see good buying emerging.
In Larsen, I am expecting a price of Rs 3134. Time frame is never predictable in stock markets. Business growth can be predictable though.

My assumptions are:
1.With 30% annual growth it should take about two years for this target.
2. The resistance of 2172 will have to be crossed with good volumes for subsequent rise in the price.

Calculations are given below.
Rs 2172 and Rs 615 are weekly high and low over a three year chart as shown above.
Multiplying the difference with Fibonacci quotient of 1.618 and adding it to 615 gives me this value.

[{( 2172-615) x 1.618= 2519},{ (2519+615)=3134}].

Let us see how long it takes for this to prove right.

rgds
Vibhas