Don't rule out new high in equities this year: Atul Suri

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Trader Atul Suri says the Nifty crossing 5100 was an important turning point for the market. In a surprise move, the NSE benchmark mark index is up nearly 19% this year amid concerns of the economy slowing down and general gloom and doom.

The bullishness, which has been global phenomenon, may lead to a new high in equity markets this year, believes Suri. "The all-time highs seen in sectors like cement, auto is very encouraging," he adds. 

According to Suri, the break out of 5400 has confirmed the bullish trend. "The riskier assets have rallied the most in the current upmove," he says adding, "fall in defensives indicating high risk appetite among investors."

On the downside, Suri expects 5100 to be a strong support for the Nifty. "The early signs of correction could come from the strength in the US dollar," he explains adding, "corrections from here will be opportunities to buy."

For rupee, 48.50 remains an important level to monitor, says Suri.

Below is an edited transcript of his interview. Also watch the accompanying video.

Q: Do you think we have finally snapped out of that bear market?

A: Yes, I think so. The bear market commenced around 5th November 2010. It was a Diwali day, 6300 Nifty went all the way down to 5400, which was on 20th of December 2011. It has been a 13-month phase and in this whole phase, you will notice that the whole case of making lower lows just continued until all the way to 5400. This is the very basis of technical analysis of the Dow Theory. It works beautifully and like most beautiful things in life, they are simple.

I think this is the great simplicity in the markets and for me the moment the Nifty went above 5100, I felt we had snapped out. Confirmations came by snapping up and breaking above the 200 DMA, which was around 5200. 5400 also was a very important trend line because if you put the whole fall of 13 months you will notice that it fitted beautifully in two parallel lines. It was almost geometrically perfect and this downward pattern snapped out at 5400. Thus 5400 was a very important level for the market to break out. With this clarity, there are no differences that we have made a higher high. This is always the prerequisite for a market to turn around.

Other factors are even more encouraging. First is the volume. If you look at the volume for the month, we are seeing record volumes in the delivery space than pure F&O speculators space. That is very positive. The FII was Rs. 10-11,000 crore in January. In another 15 days, you had a similar figure. There is a great global flow. Look beyond Indian borders, it seems to be a global rally and not only about the Indian equities that are doing well.

Look at the biggest market and probably currently the most problematic in the world - the US.  The Dow is at a 52 week high. NASDAQ - thanks to Apple is at a 12-14 year high. Dow transportation is 6% from lifetime high. There are many pockets of strength where the real global move is towards risk on trade. I think that is the theme that there is and it even plays out in some of the commodities. The kind of strength they are showing is not just India centric, it is global and that is what gives me the belief that this may be a global risk on trade. I call it risk on because when you break down this global rally in equities you will notice that the riskiest places in the world are the ones that are rallying the most.

India was one of the worst performing markets in 2011 whereas the last 1.5 month we are probably one of the best performing markets. The laggards of 2011 are outperformers of 2012. On more micro observation of this market, we have had 20% or 22% kind of rally in the Nifty from the lows of 20th December, a 1,000 point or so Nifty rally. What have some of the components of the nifty done? Three best performing stocks; the best performing are Reliance Infra is up 80% in the same phase as Nifty is up 20% and if we jog our memory back two months is not a lot of time the space you never wanted to be short in was infra and that stock is the best performing. It is up 80%.

Another space, another stock which everyone wanted to be short and which was very weak was Reliance Communications. Nobody wanted to be in telecom, there was such uncertainty. I think RComm has about 70% returns. Both belong to the ADAG group, which took it on the chin in the fall, and they are right there up there best performing. JP Associates another 70% kind of gain. The best performing spaces have been not just risky asset classes but even within risky asset classes, risky stocks.

If you take this argument, further, you will notice that on the other side are the three worst performing stocks in the last two months and these were exactly the spaces you wanted to be in two months ago. In a 20% up move, Hindustan Unilever is down 2%. This was one of the greatest stocks, great place of safety, one of the earliest life time highs, great numbers but HUL has given you a negative 2% return when the Nifty gas rallied 20%.

Another space ITC, a darling of a stock but it has just given 1-2%. Cipla thanks to its recent performance is down about 3%. The spaces that were the strongest in 2011 are probably the weakest in the first 1.5 month and the weakest spaces are the strongest and this is happening globally. it's not just in India. So what is happening is a very big risk on trade globally. India fortunately was not such a good performer in 201. That is why we are doing so well right now and the FII flows say it all. I think we are in a global market rally, great FII flows and the theme is risk on.