During Mahurat trading on Diwali, Atul Suri said the market mood seems to be cautious at the moment and broader market participation is not high. He believes, retail participation is likely when market hits a new high. The global gold prices are flat at the moment and the local gain is largely due to the currency, added Suri.
Suri also expects equities to outperform other asset classes and is hopeful of markets hitting new highs in 2013. According to him, consumption stocks' outperformance is likely to continue.
Here is the edited transcript of the interview on CNBC-TV18.
Q: Markets have done well in the last few months, but what is your sense about the market mood?
A: The mood of celebration is definitely not there. These are kind of qualitative indicators, a festive feeling, a festive celebratory mood is kind of missing from this Diwali. Though from a market’s perspective we have seen Diwali-to-Diwali almost 8-10 percent move in the index.
Some spaces in the market like the FMCG index have been up 40 percent in this period. However, the broader participation in the market is not there. I think mutual funds numbers is a good indicator of that and as far as the sentiment goes. The markets are going up, but the stocks that are going up are not what we have and what is going up is something which has gone up too much. I can’t go out and buy there. It is kind of a placid feeling out there. People still prefer to focus on gold or maybe the debt side or even real estate. The participation is not there, the mood is not there, but the ground reality is that the market has done pretty good this year. The spaces that have done well have done extremely well.
Some of the FMCG stocks are up 60-80 percent. Something like a Tata Global is up 90 percent Diwali-to-Diwali. Some of the cement stocks are up 50-70 percent. I feel the left-out feeling has not come in where people just come in and jump into it. If the market touches a life-time high this year or the coming year, that’s when I guess the retail and HNI crowed will be in.
Smart money, which was skeptical earlier in this rally has started coming in and people have been putting their hat in and getting into the riskier spaces in the market. So smart money is in, they are getting convinced that things cannot get very bad from here and in case they work out, if things revive there could be some good multi-bagger returns to be made. That’s the kind of general mood in the market today.
Q: You are absolutely right, stocks like Tata Global have moved what 90 percent plus from Samavat-to-Samavat, but I think something that has moved with as much pace is gold. Dhanteras is huge for people. What is it that you see for gold? Are you getting a bit weary or do you think that one is good for more?
A: If you look at gold international prices Diwali-to-Diwali, it has almost been flat, maybe a few percentage point returns. What has given people returns in gold has actually been the currency factor. You may have a 10-12 percent return in gold again Diwali-to-diwali, but that is not a function of actual underlying global gold prices.
Global gold prices are almost where they were last Diwali. I think the whole argument for gold is more a case of currency, the weakening of rupee that has worked in gold traders' favour. However, if I look at international prices, gold has been for over a year in the USD 1550-1800 kind of a band. And for anything substantial to happen in that asset class, it would have to come out of that USD1800 kind of band.
Otherwise, I feel that contrary to what people feel or the emotions that are driving people, equities are going to be the place to be in. In terms of returns, from last December when it was around Rs 4500 low, we are up almost 25-30 percent on the market. I think going ahead, in the year ahead we could have another 25 percent kind of return in equities.
Unfortunately, as I said people will only come in at new highs. That is when all your newspapers have it has headlines that market touches a new high and that is when people are going to start believing in it and getting into it, but they could have missed out a major part of the rally.
Q: You would be surprised then if the market is not trading at significantly newer high by next Diwali?
A: Yes I would be. I don't know what it would be on Diwali next year. But, I personally think that in the year ahead, we would make a new lifetime high. As I said, I think the market would give about 20 percent kind of an upmove from here and if you get 20 percent move in the index, if you are in the right spaces, the move could be 50-100 percent also. If you look at last year's performance, the FMCG index per se is up 40 percent.
Q: So that's FMCG, but what about the next year, give us a couple of ideas to work with in terms of the big Diwali bets?
A: I think as far as the themes, the leaders will outperform and continue to outperform. At every stage you will be countered with an argument that they have gone up too much which is a technical argument or they are too expensive, which is a fundamental argument.
But, I think that the consumption theme will continue to outperform. We talk about leaders but, you should see some of the midcap players and stocks that have moved but which I think could actually outperform going ahead. Rare Enterprise may have vested interest in the stocks I may speak about. Let’s say Pharma as a space - I would look at something like a midcap stock such as Glenmark. It has been an old favourite.
The kind of chart formation you are seeing in Glenmark and the kind of numbers that are coming out see a marked improvement. I think that here is something which could be a good outperformer. Again in the consumption space, Raymond is a good stock which I think on the charts is shaping up very well.
I would really be biased towards picking out outperforming sectors, but look for stocks which may correct and which may not be the-the kind of leader. I feel you could get outsized returns in this space. If one is going to play the risky assets, you have to have deeper stop losses and higher patience. But, obviously the real estate theme has been playing out in the last few days.
There is a thought that even the capital goods space may have some attractive valuations or some bottoming out formations. But, be very careful how you trade those spaces. In case you get it wrong or the market doesn't pan out the way we want it to, you could get very badly smashed out there. I think there are opportunities for the year ahead. They have been in the last year but been ignored. They would be discovered more in the year to come.