Sell to cut losses in bad stock or hold for long term?

Poor research led to me getting into a large position in Equitas SFB when it was overvalued (Rs. 90) and the CMP is Rs. 64. This one stock comprises of around 5% of my total portfolio and is single-handedly dragging my portfolio down. I never thought of having any stop loss when I buy because I always buy for long term investing and always do thorough research for companies with solid fundamentals. I can think of a few possible things to do. 1. Hold on to this for the next few years (Goes well with my investment philosophy. I have seen a few stocks return 1000% this way) 2. Sell at CMP to cut my losses and invest in one of my long term winners (Naukri, DLF, Infosys, M&M, Amararaja, Exide etc). 3. Sell at CMP to cut my losses, keep the cash in FD and SIP it out to one of my mutual funds as times are volatile. Btw, can I use STCL to offset LTCG? I'm reading contradicting opinions on this. If this is allowed, then one way is to sell and cut losses (around 30% STCL) and reinvest at CMP. This will help me offset some gains for this FY. I have LTCG running in lakhs because of ESOP sale. (I fired my financial advisor and don't have one now. Will probably have to ask my INDMoney appointed CA.) I know every scenario up there has its pros and cons, and there is no one right answer. What would you do?