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Last Updated : Aug 24, 2015 05:00 PM IST | Source: CNBC-TV18

Don't expect global meltdown; optimistic on India: Suri

Atul Suri, in an interview to CNBC-TV18 said that he doesn't expect to see a global meltdown. The extent of fall in Dow & global indices will have a knock-down effect on India though India will relatively outperform, it will stand out among emerging markets and will be the first market to recover.


Atul Suri, in an interview to CNBC-TV18 said that he doesn't expect to see a global meltdown. The extent of fall in Dow & global indices will have a knock-down effect on India though India will relatively outperform, it will stand out among emerging markets and will be the first market to recover.


Suri further added, India will benefit from big global commodity meltdown. Sharp corrections in market are always an opportunity to buy, current dip is an opportunity to buy into IT & pharmaceuticals.


Expect money to flow back to IT and pharmaceuticals, said Suri. Though there is a risk of Nifty breaking 8,000 in the near-term, he sticks to his Nifty target of 10,460 with a stretched time frame.

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He still feels that we are a part of a larger bull market and retains long-term bullish view on Indian market and is optimistic on India in the medium to long-term.


Below is the transcript of Atul Suri's interview with Latha Venkatesh and Nigel D'Souza on CNBC-TV18.


Nigel: Dow saw a big fall on Friday's trading session, there is a huge Rs 2,300 crore sell figure in our own markets, will India feel the knock-down in a big way?


A: The extent of fall on Dow and most global indices will have a knock-down effect on India. To expect that we are going to standout or relatively hold out is not -- we are a part of the emerging market basket. If you look at the MSCI emerging market indices, you do see that there has been a breakdown. So, I do think that we will feel the knock-down effect whether it will go below 8,000 and so is something you have to take up in measured way.


What I do think will stand about India is that it will be a relative -- that is something I saw on Friday, they are going to be relatively outperformers. That doesn't mean that if global markets are crashing -- we are not going to be a positive day. But I do think that we will relatively outperform. As and when markets stabilise, I do think that we will be the first market that will recover. This optimism is based on two things, yes equity global weakness is going to hurt us but I do think that decline in commodities which is very secular and is to be a multi-year phenomena is going to benefit this country and the currency depreciation in short run is going to hold out and money is going to flow back to IT and pharmaceuticals and to some extent, those will be the spaces of outperformance.


So, yes there will be a knock-down effect whether we will go below 8,000 is something you will have to take a measured view on that. It is quite volatile in a day-to-day situation but I do think that India will outperform. It will fall hopefully less and it will be among the first markets that will propel to higher space.


You can already see that kind of outperformance. If you look at other emerging markets, you will see that there has been especially the commodity dependent countries, the knock-down has been larger and India will hold out.


So, we are in spectacular times, especially what is happening in commodity space and these are once in a decade declines that we are seeing and India will benefit in the medium-term to long-term. Short-term definitely there is going to be a knock-down effect and it will be naive for me to think that they are all going to be down and we are going to be up. We are going to get hurt. If the extent of fall is larger, we can go below 8,000 but as I said those are semantics on a day-to-day basis but it is not my understanding or expression of medium-term to long-term trend.


Latha: Since you are longer-term bullish and you specifically mentioned IT and pharmaceutical stocks has been beneficiaries of the rupee depreciation in this fall is this where investors should get into?


A: I definitely think that these would be opportunities, exactly at what level, which stock, as I said, these are very technical or very individual driven, based on stocks and markets on a day-to-day basis. But I do think, because these are not a question of one quarter or a rupee depreciating 30 or 50 basis points, these are very long term trends. These are trends that are 5-10 years and you will have your ups and downs, when you have a very long-term trend which I think is panning out in these sectors, I think sharp corrections are always opportunities to buy.


So I still feel that we are part of a larger bull market. Sharp corrections would be opportunities to buy and I think that sectors that would stand out and they have stood out, because I am a trend follower has stood out in the last 5-7 years has been pharmaceuticals and IT. I think that's where I would like to focus on.


Nigel: We have seen a sell-off it is not as deep as 2008 when we saw a big correction over there is the current sell-off going to head the 2008 way?


A: The kind of declines that we saw on Friday do indicate that we would -- but if you talk about reminiscence of 2008, I don’t think so. In our recent memories whenever we speak of a meltdown, our mind immediately jogs back to 2008. I don’t think the world is going to that bad. Yes, we may have corrections, if it is 5 percent, 7 percent 10 percent, I would say those are about specific charts and specific stocks for someone like me. But I don’t think we are going to see a global meltdown per se. I do think that it is going to be very specific, I do think that we will be bottom up in terms of countries and markets and I do think that India will stand out.


My optimism flows from the fact of what is happening to global commodities because one of the biggest beneficiaries of a big global commodity meltdown is going be India and that's what gives me a certain medium-term to longer-term optimism as far as the Indian markets go. That is what retains my longer-term bullish view on the market.

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Latha: Usually the one sector that falls along with global markets especially when there is a growth scare is the financials, the banks, the non-banks. What do you do with a heavy weight sector like this, underperformance?


A: For me, banks has not been a trade, yes, there have been very good and spectacular return in some of the banks in the last month or so, but being a trend follower, it's not the space that I have been focusing on. As I pointed out earlier that being a trend follower, one tends to get into, may be a little late, but one does get into a longer-term trend. My focus is more on IT and pharmaceutical even auto stocks for that matter. So where is the bottom for banks, I don’t know because in my style of trading and investing, I am not in that space. So where is the bottom, I don’t know.


Nigel: You just mentioned auto stocks as well, is the risk reward ratio still high there?


A: These are not just a case of one good quarter or one good month or one numbers etc. I do see that these are longer-term trends; these are structural shifts that are happening. It's not across the board for all auto companies but there have been some stocks, some specifics, you can go into the charts and see. The prices are a reflection of as I said not a one-off event but a major structural change there is. That's where I feel that stocks tend to perform for multi-year bull markets and that is where I personally think I would like to be.


Latha: We have seen a big collapse in EM currencies and there is a big outflow underway in Indian equities as well at least on Friday. You track the MSCI emerging markets (EM) index closely. Do you see a breakdown in that chart?


A: When you look at the MSCI emerging markets, you do see -- as I see in technical parlance -- a breakdown from a symmetrical kind of triangle, which does set lower targets. That is painful. But when you really go and India is a subset of that so we are going to find our redemptions in that space.


That is very evident from the foreign institutional investor (FII) sell numbers. But the fact is that beyond a point, when people just go across the board and start looking at the various components, you will find that in this basket there are a lot of countries, that are commodity dependent, for example Brazil. Look at what's happening to the Brazilian Index or the currency and you find that there is disaster happening vis-a-vis India, this seems to be another end of the spectrum.


So I do think that after some time, people are going to differentiate, but the whole EM space, along with what is happen in the Chinese Index, is one of the weakest spots in global macros is the MSCI EM market. That is the kind of knock-down effect that you are seeing or the sell figures you are seeing in the FIIs consistently. But to offset that one of the most heartening things and I really keep my fingers crossed and I hope this continues is what is happening with the domestic institutions.


You are seeing very good flows and barring unforeseen some big global accidents, I think that the mood, my interaction with investors at various investor camps, especially the retail is showing a bit of a shift and that is positive because if you keep getting these flows to some extent it will buffer the kind of sell-off that you see. The Indian systematic investment plan (SIP) money which is coming into mutual funds has much longer-term commitment than compared to a hedge fund, which is just playing global macros and trading the emerging market index etc.


I think the emerging market space unfortunately is weak and we are a subset of that. So, we are going to see our share of selling. I hope that the thing has been offset in the medium-term to long-term but the total domestic institutional investors (DII) numbers and the flows that Indian retail and high net worth individuals (HNIs) are having into Indian mutual funds through SIP or whatever route there is.


Nigel: Do you hold on to your Nifty target of around 10,460 and in the near-term do you believe that the 8,000 mark could break?


A: Near term, yes there is a risk of 8,000 breaking because the kind of breakdown that has happened in the US markets but I still feel that we are a part of longer bull market. I still hold my targets of 10,460. The timeframe has got stretched. There is going to be volatility but I still think that we are a part of a larger bull market.


People are going to make money, if you are going to trade medium-term to long-term. Short-term, yes there is going to be pain, there definitely is going to be pain and you are going to have a knock-down effect. However, then volatility is the reality of this market. It is never linear. That is the price you pay for superior returns. You just have to withstand and sit through the volatility.



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First Published on Aug 24, 2015 07:47 am
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