India a sector & stock-specific story;Nifty seen beyond 8k: Rare

India has stood out in the context of global performance in the last two years, believes Atul Suri, Trader, Rare Enterprises. This includes market performance in the mutual funds space and returns portfolio management services, he said, adding, "While the market performance falls short of expectations, we’re still outperformers."In the emerging market space, while MSCI EM was down 22 percent, India was the third best performing market, after China and Japan, he told CNBC-TV18. Further, he assures domestic flows will continue into the Indian markets.Suri is of the view that India is a sector and stock-specific market. His top sectoral picks include consumer space and pharma, which has gained almost 50 percent. Further, he said with Nifty rising 17 percent and Bank Nifty falling 30 percent, banking has become one of the best opportunities to play from a long-term perspective in the Indian market. Meanwhile, Suri said there could be a short-term correction due to factors like dollar, emerging markets and commodity. Calling 7900-8000 a 'congestion zone' for Nifty, he sees immense momentum beyond 8000, which once crossed can go to 9000. Below is the verbatim transcript of Atul Suri’s interview with CNBC-TV18's Sonia Shenoy and Latha Venkatesh.Sonia: You have been quite optimistic on the market recently, haven't you?A: Yes, definitely.Sonia: Today is a big day so to speak because it is two years of the Modi government and if we map the trajectory we have not even seen a 10 percent gain since the Modi government came into power way back in 2014. How have you assessed it?A: Yes, you are absolutely right. Two years back the stock market really wanted Modi to come in. He came in with a big majority and if someone told me we will only be 10 percent higher two years hence I would be disappointed. So, at an emotional level yes, it kind of shocks you. We were only hoping so much would happen but I have sort of realised that things are not in isolation. You have got to look at two factors. One are the externals and the second are the internals.So, let us look at the externals. We are up 10 percent in absolute terms over a year. If you look at something like the FTSE World Index that is a very good benchmark of global markets as a whole, it has developed markets, developing markets, everything. That thing is down about 4.4 percent. So, the big picture is that global markets have had a negative two year kind of thing. It is almost 4.4 percent that is on the FTSE world index.Sonia: So, in that context we have stood out?A: That is one. If you go further you would see that we are a part of the emerging markets (EM) space. It may be wrong to compare ourselves to the US or Europe etc. So, if you look at the EM space, if you look at the Morgan Stanley Capital International (MSCI) EM index in the same timeframe that is down 22 percent. So, it doesn't look so bad.Latha: It is really wrong to look at a gross domestic product (GDP) number in 2014 and 2016 and the Sensex level in mid 2014 and 2016. What has been the global economy, the global economy is in near recessionary trend and in that context the kind of 3-4 percent earnings that we have done as well as the kind of growth that we have done is actually an outperformance and the stock markets are saying that.A: Absolutely. I track about 20-25 markets, the big ones and we are the third best performing in the world over the last two years period. Who beat us, one is China and you know what happened in China, you have had an Eiffel Tower, you don't want to be in that market. The other one is Japan. Why do you want to be there. So, essentially the two markets that have beat us on a two year time frame are pure government actions.So, even compared to the US though - I am not talking dollar denominated - we have done well. That is up about 4.4 percent. So, we are up to about 9-10 percent. So, really the thing is not as bad as it looks, because if you look at the global scenario especially the EM space you will realise that we have done pretty well. Yes, in terms of expectations but for that we have only ourselves to blame. So, it is not as bad as it looks and if you start looking at internals the picture is even better. That is why the earlier thing that I am bullish is because when I look at these internals I do not feel so bearish on the market.Sonia: So, what does the future look like over the next one year what are the internals suggesting?A: So, it is typically what the internals were and how they are going to go because this is going to be an overlap into the future. I was looking at the mutual fund performances. In the US there is this big move towards exchange traded funds (ETFs) and the index funds. Even Warren Buffet is sort of talking about it, the next generation mantra. But in India it is so such a stock specific market. It is such a sector specific market. In a 10 percent kind of move you had sectors that have moved 50 percent. The consumer space is up 50 percent. Pharma, in spite of its current fall is up 47 percent. So, as long as you were in the right spaces in the market you have still made lot of money. And that has reflected in mutual fund and PMS returns. We wonder why so much domestic funds are coming in and I was just looking that the average they have all performed 20-40 percent absolute returns in these two years.Sonia: I think it is the smaller ones, the midcap funds and all that things.A: Absolutely, and this is tax free. What are your alternatives. You go into Fixed Deposits (FD) at 8 percent or 7 percent pre tax, post tax what do you get 6-7 percent. The real estate market, the transactions are very few, people are stuck in it. So, I feel very optimistic and the domestic flows which have actually helped this outperformance in spite of global selling will continue. It is because there are no alternatives and post tax it is the best gift the government can give anybody to be a long term investor in the market.Latha: That gift may eventually peach around.A: We have always been talking about it, when it happens it will happen. We will see.Latha: The Bank Nifty chart, that has quite clearly been the underperformer. Today it is a severe underperformer. When does that chart bottom out?A: It is a phenomenal chart because that chart actually has two components. It should have two components. They should have a private sector and public sector undertaking (PSU). Here you are talking about the Bank Nifty has not done bad, it is up 17 percent and if you see the PSU bank index that is down 30 percent. And all the private sector banks, the big ones are at lifetime highs. So, you have got such a divergent view. So, as the trend follows somebody looks at trends and who likes to write them the earliest sectorial breakout is the private sector banks. So, banking may also be one of the best opportunities to play in this market.Latha: I know you don't talk specific stocks, but within the PSU space is there anything that looks like it will bottom out shortly?A: Not really because these things take a lot of time.Latha: Even the bigger ones don't look like bottoming out?A: Not really because if you really look at the last two year performance, that is what we are looking at, the last two years, you will find that what sector has got really beaten. It was your PSU bank, NSE, PSU bank index and you see that metal space in spite of the bounce, you see the infra space and at the same time you have got pharma and consumer and even autos have done well. Look at the midcap index, it is up 40 percent in this two year time frame. So, there are such divergent views. So, India continues to be a stock pickers market. If you are in the right spaces, right sectors you will find that reflected and you will outperform the index by miles and that has been shown by money managers and fund managers that they are able to outperform the index over long periods of time.Sonia: What about the IT space, we have got some good outperformance from there over the last two years.  The nifty IT is up about 21 percent. Is that a trend that will continue as well?A: I think so, if you are again in this space you will find the stocks have done very well. And not just the midcaps or unknowns, these are the big guys. If you name the top three or two, I don't want to name them but they have done very well for you and that is in spite of whatever has happened with the currency, whatever has happened with the internals etc I really think this is a great space. Look at the private sector banks at the moment they are the most phenomenal charts. Look at the media stocks. Again you can see the kind of - and it has been reflected even in the numbers. I am not a specialist on quarterly numbers but I do get a sense that things are not as bad as it seemed and there have been a lot of positive surprises. In fact I see lot of stocks having excellent positive knock down effect from numbers.So, in my view when I look at these internals, look at the consumer stocks, how many of them are making new lifetime highs. So, you have your PSU banks, there is a problem, you have in some of the infra spaces. But that has been reflected in the numbers and that is how the markets are pricing it. The markets are actually much smarter than we give it credit for and you can see that divergent proof. And as a fund manager if you are in the right space, you are riding the right trends I don't think that 10 percent over two years is going to be a limit for you._PAGEBREAK_Latha: I wanted to ask you about those hugely flying sectors, sugar and some of those agri stocks. The markets will very keenly want to know from you whether you should take profit, is all the good news there or is there more to fly?A: Definitely if you see, the global sugar charts also, you will find that these are commodity spaces and they do have that impact and those cycles. So, if you are good at playing cycles - we saw that a 50 percent bump up in all the metal spaces the question is how many people are able to get in and get out of that speed. If you are it is good for you, but if you are not if you are more passive or someone like me who is more of a trend fall and one who looks at long terms I prefer going in for some multiyear kind of trends which one can really log into and write them.Latha: And the private banks.A: The private banks - it is not exciting, it is not sexy so to term that you are not the first one into it. But it doesn't matter. The less exciting, the more boring it is, it is fine because that is when things are trending you don't have to do much. When you have to do much is when the problem is.Sonia: So, give us some exciting levels then. I remember when you spoke with us a year back. You said 10,460 on the Nifty.A: Yes, it never came, it went to 9000 something.Sonia: I won't forget that, but you said by end of 2016. So, we still have six months?A: Yes, that is okay. Markets are dynamic. So, what really happens is that we have had a one year kind of correction from 9100 plus we came down to 6800. But the market has formed a nice pattern. And I feel this area of 7900-8000 where we are stuck is very natural a place for us to find these instances. One is, if you draw a downward sloping trend line from the top, it somehow comes right there. You had the 200 day moving average (DMA) and a previous high which was 8050. So, when nifty comes out of 8000  - so even if you may have a short term correction which I think we may have because of the way the dollar is performing and I feel there will be a little weakness in EM and commodities in the short run but I do think sooner or later this 8000 will get taken out in the Nifty and     we will move towards this 9000 which was almost challenging our previous top and the market will pick up immense momentum beyond 8000 because still there are people who are absolutely in denial and things like that. And you will see a lot of people throwing in their hat.So, for me I am looking at 8000 with great interest. I do think it will get broken. Even if the market corrects in the short term, may even come down to 7500 I won't be bothered. What is giving me this optimism are the internals of the market.Latha: But is this a 2016 phenomenon you are describing?A: Yes, may be. I feel that if 8000 gets broken, you will see amazing momentum and everyone is going to jump in then.Sonia: We just heard from them that they are strengthening the eco-system etc. How do you approach all of this in our markets. Drill it down to the sectors that you are positive on, over the next 6 to 12 months?A: It is very evident that when I look at the 52 week high and lows you find that there are so many stocks which are across sectors and which are getting into new 52 week high which are almost lifetime highs. Like I said private sector banks. If we had a sectorial index for that I am sure that would be at a lifetime high. And that is no mean feat, it is very heavyweight thing and a big reflection on what is happening. If you look at the consumer space.Sonia: Like Asian Paints, Zee Entertainment all sitting at new highs.A: Absolutely, you find media stocks, they are at lifetime highs. So, you find there are lot of pockets and as I view markets, I am a trend follower and as I view markets I am a trend follower and a long term trend follower for me it is not finding the next sector. It is about identifying what is doing right now and sitting on it because sitting on a trade is very difficult. It is fun to really go out and discover something new and come up with a great idea and to be smart every day but if you have something that is already doing well which is proving itself I would think the best strategy is to sit on it and ride it. One does not have to really look for diamonds all the time, sometimes they are already there.Latha: What have you made of the global markets. Ultimately our cues are coming from there. As you said we are good in relative context. Is there this big fall waiting to happen that people talk about when everyone realises that the central banks have run out of ammunition or are the global markets giving you a sense that they will move around within the narrow ranges. What is the broad trend in global market?A: The mother of all these markets is the US and if you look at the US it is very range bound. It does have these 10 percent kind of falls but it pulls backs and that is what you are also seeing in the currency. Dollar is a very important proxy to all this. So, what you find is that when dollar came down to 90-93 and it sort of spiked up and you will see a selloff in a little bit of weakness in commodities, EM space. These spaces if India really holds out that really gives you much more confidence and sense that in the next up move we would be among the first to break out and perform. So, the market internals is what makes me positive which I would wait for an 8000 breakout to give you that kind of confirmation and things like that. But I remain optimistic on that market. Up to 7500 also if it falls in this correction I won't be really worried about and I feel that we are in the kind of a basing out pattern that is happening technically and that makes me optimistic on the market. And at the end of the day India is not an index related story. India is about sectors and stocks. If you are in the right spaces you can make lot of money even in flat markets.