52-wk high sans interest is right for higher rally: Suri

Stock-trader Atul Suri explains to CNBC-TV18 that the market reaching a 52-week high on short-covering and without domestic participation is the perfect cocktail to send the market to even higher levels.

Suri also points out that every upward in the market was led by banking stocks and that the Bank Nifty is the best lead indicator of the market. Below is an edited transcript of the analysis on CNBC-TV18. Q: Does this smack of a big technical breakout and what kind of levels do you see for the Nifty from here?
A: I think today is a very significant day. The market is touching a 52-week high at the weekly close and has beaten the previous high of 5,630. If you look at the market contrary to the sentiment on the street which is extremely pessimistic, gloomy and low in volumes, you will see that the market is on a high.
It's very rare that a market touches a 52-week high amid such lack of participation and gloom. I do think that the market has room for a much higher move in the Nifty. The 52-week high was reached on short-covering. When markets touch 52-week highs, they cause breakouts and there is a spree of fresh buying. But for stocks that have been performing in the last few days, this is clearly a short-covering rally.
A short-covering rally touching a 52-week high tells me that there is more leg to it. The market touched higher bottom-levels at 4,500 sometime in December 2011, 4,770 in June 2011 and had a higher level of 5,630 recorded today.
I do see a case for the market throwing more upside surprises. Though there have been short-term corrections, I think structurally things have changed a lot and it is in total contrast to the mood on the street.
If the mood was euphoric, one would be worried, but the mood is so pessimistic still and still people can give you 10 reasons why India is doomed and why things are gloomy. So I think the setup is great with a fantastic divergence between mood and prices and that always tells me from experience is the right mix for a good market in the next few days to come. Q: Where do you think will be the base set for the Nifty? What  do you feel will be the new base on the Nifty?
A: I think the level of 5,200 or thereabouts should be a very good base, which even at current levels is about 10%. So traders may feel that it's too deep. Even the last major gap of around 5,450 could become a very good base. But from the perspective of a bigger move, the level of 5,200 would be a very good base.
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So the base has really moved from 5,000 to 5200 and thanks to this upward move and more importantly as the market reached a higher top. Two higher tops and bottoms confirm that the market is moving up contrary to the mood on the street. Q: Where do you see the Bank Nifty? It's well above its February highs right now. What are the levels that you are looking at?
A: One cannot ignore the Bank Nifty. The Bank Nifty from my observations over the last year or two has been the lead indicator of the market. Whenever market rallies were not led by banking stocks, those rallies have fizzled out. Even if you look at the Jan-Feb rally in the market, banks led the move and propelled the markets to much higher levels.
Again today's move was in the PSU banking space. But private sector banks have also been moving up at their own gentle space. So I think that the bank index is one of the best lead indicators of the market. This market is going to surprise domestic investors who still do not believe in the rally. Q: If you had to stick your neck out and give us a level on the upside, where do you see this market head by Diwali? Do you see a level of 6,000 or do you see it go much higher because of the reasons you alluded to?
A: It's difficult to forecast the market condition by Diwali. But I guess there is no reason why we cannot see market touch new highs. It is important to consider the setup. The setup is in terms of divergence between sentiment vis-à-vis prices and flows.
And the market has been throwing up surprises for a week or 10 days and I think they will continue to do that despite short-term corrections, change in pace and sector rotations. But what I like is a 52-week high and no participation. I think that's a perfect cocktail for markets to go even higher.