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Nov 15, 2012, 08.13 AM IST | Source: CNBC-TV18

Equities to outperform other asset classes, says Atul Suri

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.

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.

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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.

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