Bank rally can lead mkts higher: Atul Suri

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Bank rally can lead mkts higher: Atul Suri

The banking sector has been outperforming since past few days on the back of stellar first quarter results from SBI. Bank Nifty too has been trading at a life-time high on sharp upswing seen in public sector banks. The rally seen in the sector, according to trader Atul Suri can lead the markets to higher levels.

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The banking sector has been outperforming since past few days on the back of stellar first quarter results from State Bank of India  along with other public sector banks. Bank Nifty too has been trading at a life-time high on sharp upswing seen in public sector banks. The rally seen in the sector, according to trader Atul Suri can lead the markets to higher levels. "Bank Nifty too is likely to rally substantially higher," he adds.

Further he states that the way heavyweights including Reliance Industries and Oil and Natural Gas Corp move too will be crucial for the Nifty, which has continuously been making higher tops. "Though the open interest in RIL has been on a life-time high, the stock is struggling. I see short-covering there", he says adding that he would be worried if the market makes new high without RIL and banks.

Though taking a call on which direction the Nifty will swing has been difficult, Suri says a correction in the short-term is likely but he continues to be bullish on the markets. "In fact the Nifty looks bullish till it holds above 4,350,"  he says.

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

Q: It has been frustrating, the Nifty for the last few sessions, do you see a major move coming, a 10% kind of move coming either way?

A: I wish I could call that, but the word is frustration. That is more important. For about a year or so, you have seen that Nifty has been in a very tight range and taking directional calls on the Nifty has been a very big challenge. But the only silver lining in all this scenario is the fact that at the end of it, the Nifty has not been making lower bottoms, it has been only making higher tops.

Even though I think that in the short run we may have a corrective phase, the important point is that we are classically still in a bull market. If you look at the previous bottom, which is a substantial bottom, was around 4,785 or thereabouts, which is May 25, so even if the market does correct, this level is about good 12% from here, I still feel that overall we would still remain in a bull market.

The problem in the last one year has been that each time the Nifty has got into 52-week high, it hasn't substantially gone up. In the 2003-2008 phase, if you remember, each time the index made a new high, it was on a tear away, just ran away and now it just barely goes into a new 52-week high and it fails. So, that is the frustration. I have spent a lot of time analyzing and for all my analysis I think the culprit just comes down to the two big heavyweights in the Nifty. I know it is a clichéd story with about 9-10% weightage in the Nifty for Reliance and if you see from January 1 to today, the Nifty is up 22%, Reliance is down about 11%. ONGC is another 7-8% kind of weightage which is only up about 6% versus the 22% of the Nifty. So, with about 15-16% of your weightage underperforming in such a massive way, you find that the Nifty on the upside is not able to create substantially higher targets. So, I feel that the crucial area for Nifty, for its moves will be Reliance. I maybe sentimental about it because probably I have been in the markets for very long and I know the power of Reliance.

What is interesting about Reliance this time is the fact that we are at the lower range. Reliance has cracked a lot in the last few days. There is a huge build-up in open interest, infact the open interest position is almost at lifetime high. So, I believe that there is a huge amount of short position in Reliance. As and when the stock does make a move, I don't know, I am a bit tired waiting for it, I think it will be dynamic simply because there are lot of shorts in the system, as far as Reliance goes.

So, overall as I said we are in a bull phase higher tops, higher bottoms, 10% kind of move to your question is a big challenge. But I think that there are many spaces in the market which are going through superlative bull markets, superlative runs and traders are focusing on that.

On the Nifty, infact we find the more popular strategies are the ones of writing options where people are still expecting a rangebound market, writing options and that has been doing well. A directional calls in the Nifty have not been very rewarding for the market and the culprit is still Reliance, ONGC.

Q: What would a short-term running correction imply to you then something that can take the index back to the 5,100 level or unlikely it will cut even that deep?

A: I think those levels are possible. As I look at things, why I am little concerned, as I said I am not very bothered, but I am a little concerned about the short-term, is the fact that if you look at some of the momentum indicators, they look a bit overbought. But in a bull market I think that is a very false signal.

What is happening is I am seeing so much excesses in the C group place and Z group place, it is unbelievable. The kind of percentage moves that are happening, everyday everyone is coming with ten new stocks and those ten stocks go up 10%. Historically, I have seen that when these things happen, when anything and every garbage moves and everyone is an operator and everyone is driving and making some crazy phenomenal returns, you have to be cautious. No one is talking about the frontline, no one is talking about the largecaps, everyone is into some unknown, not even B group, C group, Z group kind of stocks. That is a little worrisome. So, I would be very cautious of that space of the market. That is what can put pressure on the market.

For the Nifty, in the short-term, I think as long as 4,350 holds, it is fine, it is all bullish, and it is hunky-dory. But as and when you start having little price breaks, I feel there will be a run to a door, especially in this Z group kind of space. So, that is where I feel people should be cautious. That is making money, no doubt and everyone thinks they are going to be smart to get out first, but that never happen. So, just be very cautious on that space.

The largecap will not correct much. As long as we don't make a lower bottom, I think it is all fine. I still think we are part of a phenomenal big bull market, which over the period of time will definitely get into a new high.