Trade for the year 2011 is commodities: Atul Suri

In a chat with ET Now, expert trader Atul Suri makes a technical analysis of the current Indian markets and predicts top trades for 2011.

Time to reinitiate shorts as the Nifty, is it done and dusted with the upside that we saw?

Atul Suri: You are coming out of the last few days of virtually being jabbed if you were on the bearish side which most were till about the budget day and then you get pulled up in what the largest gain in two years and this morning again with crude doing what it is and bit of a move down. So it is very tough. It is nice to talk about it, but it is like one day is yours, one day is mine and you are getting jabbed around. The last 3-4 days, there is nothing significant.

So which day has been yours?

Atul Suri: The best day was the one when I did not trade.

So are you long, are you short?

Atul Suri: I do have a little bit of a bearish bias in the short term, but the fact is that the move that was there on Tuesday you cannot ignore it because stocks were up 4-5-6-7% and giveback was a lot. So it is a tough market to be very honest with you. I can give you opinions of what I think etc. etc. that is a view, but as a trade if you ask me and you speak to any trader on the street who has his money where his mouth is, it has been very difficult, it was great till Monday.

Even on the budget day, the volatility was you could absorb it because that is a budget day volatility. You expect it, but you do not go out and expect a market to move its top single gain in 2-2.5 years and then the follow ups at the moment right now with crude being what it is, it is no so stunning. So it is tough, it is a reality, that is the way it is.

You represent Rare Enterprise. So what is house view?

Atul Suri: I do not represent Rare Enterprises and we do not have house view. That is a disclaimer, these are my personal views, but it has been a market that has been seesawing on both sides and you do have certain pockets of strengths that are there in sectors like autos and banks etc. but these are very big segments in the market, especially the midcap, small cap space if you look at the damage that has happened.

Traders who are in that segment of the market, 30% to 50% across the board, So the index may not actually tell you, is hiding a lot, but there has been a good amount of damage with a lot of people especially who are in that segment of the market. So that is the kind of mood and sentiment there is, but you cannot ignore a day like Tuesday.

What about the downside, is 4800 a probability?

Atul Suri: No, I do not think it is that much. For me, levels around 5050 or just above 5000, but what is more important is that we have had this pull as I said which we cannot ignore. The issue is that is when does one reverse one’s thought process or when do we feel that the market is actually on an uptrend. The level of 5600 on the Nifty which has been the previous stop, if that gets taken out, that is what will give you more confidence in the market than just purely one day blip. So always in a market that is trending down, you do have these one-day up moves which have excellent short covering days.


You find that the stocks that are beaten down tend to come up much sharper but what I would look for is follow up buying. At follow up buying, I would get convinced if the Nifty smoothly takes out and closes beyond 5600 or thereabouts. So I am still waiting and watching. I still would not go all out on the market, but then that is the way it is. As I said one day is yours, one day is mine, the bull bear up. Both really locked in right now and the fight is severe and there is a lot of blood that is dripping from both sides at the moment.

What about the charts of crude? Now we are already above 100. What are these suggesting?

Atul Suri: Crude as a commodity has a propensity that when it gets into a trend, it tends to be very sharp and very spiky. We saw that in 2008 when crude took out these 100 levels, how soon it went to 140 or thereabouts and we see the crude charts, we find that there have been sideways are very benign compared to other commodities for almost 2-2.5 years and now crude has again taken out that $100 mark. So what one is seeing as a very high level of speculation.

If you look at the whole commodity space, you will notice that it is not that there is a huge demand-supply mismatch that is happening, but what is happening is there is a lot of financial speculation. When you look at hedge funds in the US, you look at ETFs in the US, you will find that these are really those dream trades, you find that ETFs are being launched everyday in some commodity and with ETFs what happens is the money has to be deployed. Last week we have had so many new crude ETFs coming in and whatever money that comes in, that goes and gets deployed immediately. So that leads to spiky movements.

So crude beyond 100 tends to have a very high degree of financial speculation. It tends to spike up very fast and that is what really we are seeing. Geopolitically also, the Middle East, who knows Gaddafi, which country it is going to be next, but these all leads give it certain amount of uncertainty and gives it a spiky nature. Unfortunately that spiky nature of crude does not say well for Indian markets, but then that is a reality.

But what is the headroom you are looking at? What is the peak level that crude could see?

Atul Suri: When commodities break out, like let’s take the case of some other commodity like silver, when silver broke into new highs, you see the kind of move that is happening, the moves that used to happen in years are happening in a week, that is the quantum & size of move that is happening in commodities. So if crude goes up another 10-20%, nobody knows, but it would not surprise me because it tends to have these very sharp spiky levels beyond 100 and that is really what is making me jittery on the commodity and on our markets as a whole.

What about individual sectors? Are you seeing follow up buying anywhere or is it short covering that we have seen in the last 2 days?

Atul Suri: There has been a little bit of buying for sure because in places like autos and banks, I do think there has been buying. There has been a little more of short covering. The most important thing for any market to turnaround or get into a bull phase is to see follow up buying and that is why for me 5600 is important because that will represent that it is not just a case of one day spike, it is not just a case of one day short covering, but there is more strength and money to take it beyond 5600.

Why I think 5600 is important because one, it is the high of Feb, the market had gone to 5600 and failed. So that is the case of lower top that there is which is also where somewhere the 200 DMA, a lot of other averages are. So that is what makes the 5600 to 5700 range as a very important. It is a cluster of let’s put it many resistances.

So would you continue to buy autos?

Atul Suri: Again that is a very relative question because as a sector yes, it has shown strength and if I have to buy the sector that I would be biased towards is autos.

What about the trades?

Atul Suri: I am just raising the point that the issue is that in case 5600 gets taken out, where do I see the percentage gains. One of the lower risk areas is going to be IT. We do not speak much about IT, but if you really realise it among the sectors, the sector that has fallen the least has been some of the IT stocks as a sector index or some of the bigger players that there is. So at the moment seeing the way the global markets are, it is a direct beneficiary of the US bounce back etc.

IT relatively has little less downside, let’s put it that way. It is a relatively more safer sector to ride on. Autos and banks, banks are important simply because not only is it a large sector but remember it has the largest weightage on the Nifty. So it has the ability to propel the Nifty as a whole and create that kind of turnaround. Bank Nifty movements always precede a very big Nifty day. That is in fact a lead indicator right now.

Let’s talk about some big trades and let me define the big trades. The big trade for the year 2009 was to buy emerging markets, 2010, the big trade was to sell China and buy India. What to your mind is going to be the big trade for the year 2011?

Atul Suri: It is going to be the commodities because if you look at the commodity charts, say copper may be wobbling a little bit, but these are all lifetime highs and one cannot disrespect lifetime highs. If you look at the moves that have happened in silver, gold is an old story but the fact that it is an old story that is a decade long and it is still making you money most years.

Does it make sense for our viewers who are hearing you to buy a commodity ETF, buy a commodity mutual fund, some mutual funds are offering that product?

Atul Suri: That is again, I have a trading mindset and I am a trader. So for me what is important is to ride the trend. For retail investors very often, I find that they really should go to professional money managers of mutual funds because markets are much complex and much faster as things are today, but for a trader from a trading point of view, I guess that is where the sweet trades are. The trade for the year is commodity. People may think it has gone up too much, but financial speculation in commodities is very high and that is reading to very sharp moves, whether it is crude, copper, silver, gold, agri or whatever there is.

Pockets to avoid completely?

Atul Suri: It may sound clichéd, but at the end of the day, it is not rocket science, things like real estate, infra, telecom. Yes for an investor it may make great sense that he may find some great value and have the patience and time to hold...

Not even Bharti?

Atul Suri: Let’s not be stock-specific, but these are sectors for a trader’s point of view, these are the sweeter shots because the day the market is down, you immediately find then that they are the first thing that hit day’s low. So as a space, as a sector, it is nothing new, it is not rocket science but the fact is that the trend, if you look at the border trend, it is stronger for autos and banks, it is equally weak for something like infra and real estate just as commodities again are charting out very big global trends there are and that is for that. We may not like it in India because very often they have an inverse relation or tend to be importers, but the fact is that there are very spectacular charts, they are moving 3-3%, 5-5% in a day and it does not normally happen that way.

Crude, gold, silver, which is the strongest, what is your price target?

Atul Suri: Silver, at lifetime highs, there is no price target.

So it could be 60000-70000?

Atul Suri: It is just the trend. You have to keep a stop loss and ride it because it is like never stand in front of an oncoming train, you are going to get blown away. We cannot estimate the quantum of a global asset class, a global commodity running at lifetime highs, it states something special is happening, look at gold. It is a multiyear, multi-decade trend and who knows what the top is.