What is the outlook of Chemfab Alkalies, I am holding 350 shares since Jan 2009 @ Rs38 : Sateesh Thumula from Chennai

Dear Sateesh,

We use to get many stock specific queries but during last 2 days I have got almost 20-25 queries asking the outlook of this company. This happens always when any stock start moving sharp upward, same thing happened in this case, during last 2 days it has take 20% UC on both the days which is un-usual and happens only when there is some big news going to be announced.
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Fundamentally, this is yet another company, nothing great about its business and its financials but technically it is showing strength and may be heading for long run. It is trading at 52 week’s high with volume, normally if a breakout happens with big volume it looks sustainable. There are many cases where stock price start moving up non-stop and stops only when it acquires its real valuation, just for example Unitech move in year 2006-07 and NMDC/MMDC move etc. But sometime, such upward move may turn out to be a trap. Because transparency is not maintained by the company and insider buying takes place before the real news break out.

Even in this case a rumor is running around about this company holding 120 acres of land somewhere near Pondicherry which is worth Rs900 odd crores (just referring a post from moneycontrol message board). This may be true or may not be, so one should not get carried away by this news. If this is true, then valuation will increase multiple times beyond our imagination and if it turns out to be false then stock will fall back to the realistic levels. Final suggestion is to book some profit now and ride this up move as long as it continues.

-JK, Lead Associate, SLT

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