Market could surprise on the upside: Atul Suri

In an interview with ET Now, Atul Suri, trader, talks about the market and shares his outlook for various sectors. Excerpts:

ET Now: Last time when we interacted on this forum, you were tentative, you were cautious. Are you bullish?

Atul Suri: Yes, I am. In a week, it all changes, but I have a reason. If you look at a bigger story that there is, we could be at an inflection point. Why I say this is that the recent high or a substantial high was made on Diwali day of 2010, 6300 Nifty and subsequently you will find that the market has been coming off. In this whole pattern, you have a case of lower bottoms and lower tops, which is a classic bear market or a corrective phase, just as an upmove, you have higher bottoms and higher tops, stocks, markets, commodities, anything it works. Now the last major bottom was at 5177, which we hit on the Nifty in February.

ET Now: The budget low?

Atul Suri: Yes, that’s right. So 5177 was a very important level and as and when 5177 gets breached, you could say that we could begin a leg down. We were almost at that level last Monday. On last Monday, we had this whole rumour about this Mauritius tax treaty, Greece had a problem, consensus bearishness in markets, a lot of shorts were in the system, and it just seemed like the market had to go into a new low. It was just a matter of time.

But the screen did something else, the market did something else. We actually hit 5195, so we almost made a kind of a little bit of a higher bottom and in spite of consensus bearishness, in spite of all the pessimism there was, the market actually went out and did something else. So a breakdown of a pattern, 54 was a very important level, various pattern breakdowns were happening. So when pattern breakdowns happen and they fail, it very often leads to a very big kickback on other side.

It really tells you that everyone is thinking something else, but the market is doing something else. And as a trader, we all know that the market is supreme. So the market is telling you something else. What you are really seeing in the price action in the last few days is not just a surprise rally, but a very steady rally. Each day we are just clubbing in some amount. Even intraday, you are not kind of seeing the thing and in fact, I was just seeing yesterday that the FMCG index is at a lifetime high.

ET Now: Even the pharma index is marching towards that?

Atul Suri: It is very near that. I would say the consumer durables are very much there. So the number of stocks at 52-week highs is so large that compared to perception, the market is doing something else. It is just that the weightages in the Nifty are very skewed towards the oil and gas space, which really has not been doing much. Banking at best is doing a market performance. So you are really not seeing it in the Nifty. But when you have 10-20-30 stocks at lifetime highs, it throws a very different picture. So what you see is very different from what you feel.

ET Now: Are you convinced though what the screen has been telling us about the five days or is it still looking fragile and post the expiry, do you think the tide is going to turn?

Atul Suri: You may have short-term blips, but as I said these breakdowns had happened, which failed very often leading to very big upmoves and that for me is the basis for a certain amount of bullishness. Obviously the price movements will last a few days, new lifetime highs that really give me the feeling that the market will surprise on the upside contrary to sentiment that there is. Even things have not changed much in the street, still the sentiment is cautious.

People think that 5600 it will be, 5700, today expiry, okay, we will see tomorrow. So it is still a wait and watch kind of thing, but the market in its own wisdom is just crossing to new levels. So that’s a very good setup. It is a very good setup, failure of patterns, still no bullishness, short covering that’s propelling it, yet a lot of fresh buying has to come in. Fresh long positions have to come in, so that is really what creates pace on the upside. On a day-to-day basis, it is difficult to say, but I do think the market will surprise on the upside.

ET Now: So for positional traders, what levels are you recommending?

Atul Suri: It is a bit of a technical jargon, but if you draw a line, which is linking the three tops that there are, I see some things like around 5730 as to where that line is. It is a trend line, let’s put it that way. As and when that breaks out, you will have another very set of dynamic moves that there are. So for the moment, I am looking at 5730, which is about 130 points from here, and with today’s expiry, a new settlement starting, hopefully in the next few days that should also get answered.

ET Now: Do you cut all your shorts in commodities?

Atul Suri: I personally think that on a little longer timeframe, the trend is still down in commodities. In the last one or two days, there has been a certain amount of weakness in the dollar, which has lead to a certain amount of upmove in commodities, but on a longer timeframe, commodities are still down -- whether it’s crude, whether it’s the precious space or whether it’s industrial metals.

ET Now: So what is this big stop loss for short traders on crude?

Atul Suri: It depends. A stop loss is something, which can never be defined. Stop loss is more a function of each ones risk appetite as to what one can give back in a trade and that’s something you really cannot define. Most of the things are definable. There are a lot of books written on how to buy, how to sell, but very few books on stop losses because as someone said that the stop loss is not from the head, it is from your stomach. It is really your risk appetite.

ET Now: What could lead the leadership?

Atul Suri: What you can really see is again stocks that breakout first and you can see that in the FMCG and the consumer durable space. This is something that is visible. It is visible in the last few days, but what I really feel is going to be important is the banking space. Why I think so is that as the sectoral weightage, the Nifty itself cannot propel to very many new levels without the performance of banking. Oil and gas is a total dampener. We had some very encouraging news in OMCs, but we have not seen follow-up price actions.

ET Now: Even oil marketing because HPCL, BPCL, they are looking strong?

Atul Suri: They are certainly looking strong, but what one requires is follow-up action and if you put in Reliance into that pack, the whole oil and gas space as an index or as a sector, there was a hope of leadership but there has been no follow-up. But I personally think that banking is something that will surprise and why banking is important is because of its weightage in the Nifty and for a sector that is really beaten down and ignored. You are already seeing it in the private sector banks. They are showing very good strength, you saw it in HDFC Bank yesterday. It was again at certain new levels. But I personally feel that even PSUs will get into the space and that’s when you can see that the Bank Nifty itself could be a very interesting place.

ET Now: What about pockets which have already seen a significant amount of run-up -- FMCG, pharma -- they are looking toppish now?

Atul Suri: I do not think so, because when a rally starts, which has happened in the last few days and certain stocks break out into new highs, one really cannot sort of cap them. You would be surprised with the kind of moves they have. People bring in issues of valuations, etc., but I have seen that when trends start and when sectors move and when leadership comes, it is quite crazy to try to limit them. It is like standing in front of an oncoming train. One really does not know. It may make sense that there is a station, it will stop somewhere, but it may just not be where you are standing. It may just run through you. So I would not really fool around and try to limit these people. They could be in for real surprises.

ET Now: Now let me compliment you, great call on autos in 2010, that worked like a charm for you. Now what is your big call?

Atul Suri: I personally think that the consumer theme, the consumer story, again I am not limiting it to FMCG, but it is a much wider space there is. But the consumers theme will really set out and achieve levels, which most people’s minds cannot imagine right now.

ET Now: So without getting into stock-specific recommendation, do you think a level of 1500 on Jubilant FoodWorks, something like Rs 300 for Titan, maybe a Rs 300 for ITC, is that conceivable?

Atul Suri: Yeah, why not? Just go back when the IT boom was happening, when the real estate boom was happening, what could be limited? Could we imagine stocks going 10 times there? What sort of valuations there were at that time?

ET Now: But that was a crazy bull market, this is not a crazy bull market?

Atul Suri: You never know. You could be at the cusp. You maybe at the start, again it may not be on the index level because the index is always back calculated. You remember at one stage, FMCG was the highest weightage in the index and today it has no weightage in the index. So when these guys are moving, it is not representing in the index. And the time may come when FMCG may again become the largest weightage simply by virtue of price performance. So I feel that in a trend at lifetime highs, we should not try to limit it because irrational things happen. It is just best to go with it. There is no use trying to be too smart.

ET Now: What about the S&P and considering our correlation with the US markets as well, what are you sensing on the charts?

Atul Suri: The US again in the last few days, there was a fear that they would break down. It bounced from its 200 DMA and held on very well. So that is again very heartening, but what I really feel is that India in the last six months has been charting its own course. What has really been happening is that you will notice that when the developed markets were really getting into new highs, India was something that was really struggling. So I do not see any reason that if those markets remain placid or may not do so well, there is no reason why because the whole theory or the basis on which India was sold out may well reverse. If that happens, you may see that the excesses that were done in the downside may be also the things that may pull back on the upside here.

ET Now: So gold or silver, what would it be?

Atul Suri: In a longer timeframe, gold is much more steadier. You find that silver is much more a trading commodity and the moves in silver are very fast and very drastic. It cuts very sharp on both ways. Gold has been much more placid. Among all commodities, it is the one that has actually held on very well, it has been gold. For a longer timeframe, gold makes a lot more sense.

ET Now: What are your thoughts on Bharti?

Atul Suri: What happens is that if you look at many stocks there are in the space, for example you can look at L&T, you can look at Bharti, ITC there is, you can look at Levers, all these stocks have held on very well on the downside and that’s what is very important.

ET Now: For the year gone by, the best performing stock was Bajaj Auto and the second best performing stock was TCS. Do you think both these stocks have done their bit and the springtime is over for these stocks?

Atul Suri: They are very good stocks.

ET Now: Both Bajaj and TCS?

Atul Suri: I think so. In fact, TCS may surprise because as and when IT moves, I found that TCS has been always an outperformer. It has been for the last few quarters, there is. Again one cannot write them off, they may surprise, but what’s very important is that always every new upmove brings out new sectors and new stocks. If it was autos in the last move, if we have a move going on, maybe it is a consumer theme, maybe it is FMCG. It is always a cyclical nature of this market. Nothing remains constant. Very often the outperformers, like India was an outperformer last year and was almost the worst performing market till about a few weeks back and suddenly you propel yourself in the last one week to again being one of the best performing markets in the world. So the cyclical nature of these markets is very real.

ET Now: What about high beta? Would it also include metal stocks? Would you include realty or is it a complete avoid?

Atul Suri: They will also do well, obviously if the markets do well, but there are a lot of other spaces which are more obvious. Capital being limited, the number of stocks you can keep on your portfolio limited and that maybe someone else’s trading style, but that’s not mine. I am a trend follower. I really see that what trend starts or when trends start, it is very difficult to limit them. I would rather be in that space than be in stocks which are good for a bounce. A bounce again as we understand is a limited space. I would really look for something that goes obnoxiously high, however good or bad the valuations are, however justified or unjustified it is. But the speed and pace of money making for a trader is much better there and that’s a space I would prefer to be in.

ET Now: Give us one such obnoxious name?

Atul Suri: We have been really speaking about these stocks. We have been really speaking about this whole consumer theme that there is. Again I would just not limit it to FMCG, but in the whole consumer theme. You can look at your screen, the kind of moves there are. Most important thing for me is the fact that when the markets corrected as they were, stocks that were holding out, stocks were still touching new highs. That really shows that there are such strong hands in those stocks that even in falling markets, they are really not bothered about getting a better price. They are bothered about covering quantities and those are stocks which I think will lead.

ET Now: So your assessment is that it is too early to sell the Titans and the Jubilants and the Nestles of the world?

Atul Suri: Absolutely. It makes no sense, leave alone sell, it make sense to buy. One may pull your hand by saying that the valuations are high, they have run up, but there is nothing in history that tells us that what is high does not go higher.

ET Now: So how should we summarise this interview that Atul Suri is bullish in the short term and he expects markets to cross a new high very soon?
 
Atul Suri: I would not say a new high because there are a lot of hurdles on the way, but I would be on the long side of this market. But then again as a trader, one does have stop losses, one does turn around and it makes a lot of sense. It may not make good media sense that you say one thing one day, you say another thing, but as a trader, that’s a reality. How much life has changed in one week. And if you were obstinate enough and stood on your shorts, you would be slammed. So I guess that is the reality, but at the moment, I personally think that this upmove will surprise. It can be much larger than what people think and the spaces that we spoke about, the consumer theme is where the outperformances are.