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Nifty may hit 7050 in 1-2 years: Atul Suri

Published on Wed, Nov 18, 2009 at 11:32 | Source : CNBC-TV18

Updated at Mon, Nov 23, 2009 at 11:35

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Trader Atul Suri feels that the markets can make a new intermediate high with the Nifty hitting 7,050 levels in one-two years. It has very good support at 4,550 levels, he says, adding, "I have set the Nifty intermediate stop loss at those levels."

On the global footing, Suri says the global equity market can go substantially higher. "The dollar may rise in the near-term which will put pressure on the markets." The Dow Jones can go up to 12,500-13,000 levels, he adds. Suri expects a 20-25% upmove in the US equity markets and advises short-term traders to follow dollar moves.

He feels the sector indices touching life-time highs is a positive. "A lot of mid-caps are showing strength on charts," Suri says, adding that telecom, real estate and infrastructure are attracting short positions.

Here is a verbatim transcript of an exclusive interview with Atul Suri on CNBC-TV18. Also watch the accompanying video.

Q: We had a correction, but before we could spell the word, we are back to more than 5,000? Are we about to hit or set a new intermediate high?

A: Yes. When I see markets on a longer timeframe and the larger indices like the MSCI World index, in the emerging market index or the Asia index it is visible is that over multi-months we have made inverted head and shoulder on most of these indices. Equity markets throughout the globe are likely to go substantially higher from there. India is a sub-set of that. So in this whole environment of a very bullish equity environment world over, sooner or later, we will get there.

In the Indian context, we are seeing similar patterns here also. I would draw a horizontal line around 4,650 or thereabouts and begin my count from there. If you project this, you get some very ambitious targets like 7,050 on the Nifty. That is substantially new high and it will take months, a year or two years, but there is no escaping that. It is pointing towards substantially higher markets.

When I set out such high targets, it is very important that the theory can fail. I bring in the Dow Theory which says that any market going through an uptrend follows a simple principle of higher bottoms and higher tops.

As far as I am concerned, for my mindset on the market, the recent intermediate low we did about fortnight ago around 4,550 or thereabouts should stand as a very good support. In case that breaks, we would make a lower bottom and one would have to revisit this theory. However, as a part of the global move in equities and the kind of performances we are seeing in India, we are going to get into newer levels and newer ranges. It is not going to be a straight line. It is going to be up and down. In short-term, the dollar may put some pressure because the Dollar Index is not breaching 75 and looks a little oversold. So it could do a little bit of a spike up here or there. It is a reality whether we like it or not. Things can be iffy in short-term but I do think over a period of time. Over a few months we would be substantially higher from here.

Q: The Standard & Poor's (S&P) is getting to that 50% retracement level from October '07 levels and from thereon there is usually a rally that comes forth. How have you read the happening on the S&P? Where do you see that headed?

A: Being a Dow theorist, I like the Dow. So I will restrict myself to that. On the Dow, I see it getting to 12,500 to around 13,000 levels which is again a 20-25% move from hereabouts. You have these retracement theories. There is no real indicator on the price charts. As long as markets are making highs, they are showing strength and are going higher, day on day.

I don't see any reasons for reversals. There were divergences but they have got corrected. So some day the markets will fall. However, over a period of time there could be 20-25% up-move in the US markets itself and you will see this thing building up in the days to come. There is a lot of skepticism on the street and that is the best thing. The best thing for markets is a wall of skepticism because always markets rise on a wall of skepticism. When everyone is shocked and everyone is certain that it is stamped then I would be worry and I look at all this skepticism with a lot of joy.

Q: What is the immediate stop here that we are looking at? Is it 5,200 or is there something else happening between here and then?

A: For an intermediate kind of trader or for someone like who looks at a lower bottom, lower top kind of theory, the intermediate bottom we set about a fortnight ago around 4,550 is where I would look at to keep an intermediate stop loss for a very positional large trader. For a short-term trader, the best thing to do nowadays is to look at the dollar. The correlation or the inverse correlation to the dollar is very evident. I would look at 75 as a level for the dollar. In case the dollar breaches that, you would have a very big surge in equities, if not then you could pullback to around 76.10. It is just a little bit of an oversold pullback. However, I see it going much lower and that brings up the whole thesis of long equity short dollar on an intermediate time period. In short-term it may wobble around and create some problems.

Q: Does this level of 5,180 present any challenges technically? We read a report from CLSA this morning where the chartist is pointing out that the chances of a double top somewhere around these levels exists. In this case a fall back to 4,000 kind of levels on the Nifty cannot be ruled out. Do you see that probability at all? Is it a significant hurdle to cross?

A: I do not preempt patterns. I let patterns play out and then it is for me to predict targets. So I don't know whether we get to 5,180 and top out. The reason is because there are so many other global markets which have taken out their previous tops like the US for that matter. If you look at the Hang Seng and other Asian markets, look at these Chinese markets. Hence, all these markets have taken out the previous recent highs. I see no reason why India should double top out there.

If you go down and start looking at the components of the markets, you will see that there are three sectors which are at lifetime highs. Everyone is talking about the auto index. It is a sectorial lifetime high. Auto's is very important because they are lead indicators of state of the economy. It is not just a bubble kind of scenario. When they sell, they have a multiplier effect. You can see the way auto ancillary stocks are performing. Second sector indices that is at a lifetime high is fast moving consumer goods (FMCG), inspite of Lever not doing well. If you look at the performance of stocks below, they are at lifetime highs. The healthcare index also has a lifetime highs. So the IT index is doing fantastic. Infosys is at a lifetime high.

When you have so many sectors and stocks at lifetime highs, it is going to be a little premature to call the top or something like that. Let the prices weaken, let prices fell, let some patterns get violated then we can talk about certain downward targets. As far as I am concerned, I would keep 4,550 as an intermediate stop loss for my trades. There are certain sectors or stocks out there which are doing fantastic. More than Nifty, if you look at some of the stock performances in the midcap space, it is mind boggling and it depends in which space of the market you are in.

Q: What is your sense of the broader market when you look at the charts of either the midcap index or a cluster of midcaps that you track? Are you getting the sense that you could actually see outperformance from that side of the woods?

A: This is exactly what the trade has been for the last three-four months. On the Nifty per se, it has been very difficult to trade. If you find that you are 200-300 points in the money, the market pulls back in two-three days and you do not get much juice out of it. However, if you look at the flip side, the market has corrected 10-15% last fortnight from IT stocks. It has to see what kind of correction they have done. So it is very important in which space the market is.

Infosys , Tata Consultancy Services (TCS) and Wipro didn't shudder when the market was correcting and that brings out strength. As a trader, you would like to be in such spaces. Just a disclaimer, Rare Enterprises and I would have a vested interest in all the stocks. If you are on the real estate space or you are in the infrastructure play, you are getting chopped around. So it depends in which space the market you are and there are lots of spaces in the midcap space which have got phenomenal charts.

Q: What about midcap IT? Many names from there as well are trading at all time or new highs?

A: You look at some of the stocks like Infosys, Patni , Oracle Financial Services Software Ltd (OFSS) or CMC , you will find the kind of charts, the trajectories that they have been and the angles of the stock price that they have been setting, there is no correction for you. You have to just see through them and they are absolutely sweet trades. So there are many such pockets in the market where you will find such midcap spaces and that is where you have to be. If you purely focus on the Nifty, Reliance pack or some of the real estate stocks, you will find yourself getting chopped around. However, there are some very sweet pockets in the market. So many sectorial indices are touching or getting to lifetime highs. This keeps me positive on the market.

Q: Give us a quick word on banks because that is another very large and influential cluster in the market. What signs are you picking up there technically?

A: I agree with you that banking is the keenest sector that I look at because for the index drives things and the highest weightage in the Nifty is the banks. When we touch this 5,180, banks put their hat in and get the performance in. I would look at the banking Nifty and the banks as a space.

The banking space is not so bad. They would not be doing well for the last day or two. However, I don't think it is so bad because again there are a lot of good looking charts.

There are a lot of stocks that have been trending very well and maybe they are just doing a consolidation. I won't be surprised if banks pull their way through sooner or later. Only banks will have to put its hand up, perform and take the Nifty to new levels. It is going to be a time of consolidation. However, they will go higher simply because some of the space apart from the frontline is very well shaped. Sooner or later it will happen, the State Bank of India (SBI) and ICICI Banks of the world will get going.