See Nifty range at 7900-8000; bank index to sway mkt: Atul Suri

The current year is looking tougher for the market, Atul Suri of Rare Enterprises said adding that 7900-8000 will be the most crucial levels for the market. If 7900 breaks, Nifty could test levels of 7500. Full recovery in market can happen only from 8600.“Make or break for this market will be banking index,” Suri said. However, the sector is not showing much buoyancy or leadership in current times. The next leg of opportunity for the market will come from consumption stocks. While consumption theme is still intact, Suri recommends staying away from banks.Market trends are determined by the foreign flows and not domestic flows. DIIs will continue to grow via the systematic investment plan (SIP) on back of structural changes.Below is the verbatim transcript of Atul Suri's interview to Latha Venkatesh, Sonia Shenoy and Anuj Singhal on CNBC-TV18.Anuj: 2016 to be fair wasn’t a bad year if you got your stocks right. The index won't tell you much but 2017, what is in store?A: As far as 2016 goes, it goes like a very good movie that had a potential of a very good climax but ended badly. So if you look at 2016, the first two months of January-February, the market came down around 14 percent and your darlings at that stage were pharma. If you go back and see our interview a year ago, we were all harping on pharma and they got smashed. So you had two very bad burns and then you had a dream run. Nifty had touched 6,800, we went almost to 9,000. Seven months, 30 percent very secular move, a lot of the consumption stocks got back, a lot of financials did very well and at that stage, we were masters of the universe. We thought the year would have been fantastic but the last three months have been very disappointing. Though we are showing a 9 percent decline in the Nifty, net only 3 percent for the year, the stocks that have got beaten where people were overweight, consumption, financials -- the beating is there till 22-23 percent. So it had the makings of a great movie but it just the climax the director forgot, he made it an anti-climax.So it has not been a very satisfying year in that sense. So you can also see a mutual fund returns, 5-10 percent kind of range, just a little better than maybe the FD rate.Latha: We see only that because we cannot buy shares so it does hit home.A: And FD is going at even worse now.Sonia: If you look at the glass half full, at least we protected that Brexit low of 7,950-8,000, you think that is a durable bottom or you think that could be taken out?A: The pain was you should have seen what the global markets did in the last three months. So I think the pain got even further.Coming to your levels or how we see the market going ahead, that is more important. This level of 7,900-8,000 on Nifty is very important. You even see the way the option build up has been for this current series and why this month of January is important is because of your results post-demonetisation. You are going to get a lot of surprise results, I also think a lot of guidance and there is going to be a little more better grip on the situation, till now no one is talking much, everyone is uncertain but this is going to be a very important month and you will see where your Put writers, that means people who are bullish is very strongly standing at 8,000 to 7,900 band. That is very near where we are right now.So from my point of view, I think that this will be a very important level. I don’t know whether it will hold, not hold but I do think that it will be a make or break point for us. In case, this level of 7,900 to 8,000 gets broken on a more consistent basis, I think we will be in for a lot of pain and this will also be the making of a base at the moment but for that I think the market will have to claw back a bit slowly. The immediate area, the shorter-term kind of resistance is around 8,275. That has been the band for the last two months and the big challenge will be if we move to 8,600. So you cannot paint the coming year with a broad brush because you aren’t getting that sense of clarity on the charts in terms of patterns etc. It is going to be a clawing game whether this 7,900-8,000 holds, 8,275-8,600 gets taken out. So it is going to be a challenging year, it is going to be more stock specific and more sector specific and of course the FII, DII flow equation is one of the most interesting things that will pan out.Latha: What do you think about Nifty Bank -- but separately PSU banks?A: I think the year gone by -- if I am not mistaken -- PSU banks have outperformed the private sector banks and this must be after many years. So from that point of view, the make or break for this market is going to be the banking index. It is a lead.In the US, how you have Dow transportation etc acting as lead to the movement of the broader Dow. I think in India clearly, Bank Nifty is a proxy to that.Unfortunately, it is not inspiring that kind of confidence. You always see a lot more perk in the banking space. I don’t know things are dynamic, they may change but I think that for traders or for market participants they should take a cue or a clue from the Bank Nifty and at the moment, unfortunately it is not showing that kind of buoyancy or leadership. It is tending to fall a lot more. In fact, the broader Nifty seems to be holding out a lot better in the last few months.Anuj: You are sounding much more pessimistic than we had on Muhurat Day. Is there a risk of a near-term bear market for Indian equities and we have underperformed over the last two-three months?A: I don’t know but for me this level of 7,900-8,000 is important because for me the levels are important, price movements are important and I have my fingers crossed for this.Exactly, Diwali was a great time and I thought the whole EM space would outperform the developing market space and how things have turned around. So in these situations where you have your Brexits and you have Donald Trumps and you have demonetisation, it is kind of difficult to take a very long -- it is there for the next three-six months but  having been in the market for so many years, that is when things seem all not so right is where opportunities are and I for one thing that these numbers that are going to come out of this January-February time, the most beaten down, talked down theme is consumption but all consumption stocks are not the same. A lot of them are available 20-30 percent and there we are going to get some silver linings and bright spots and that is where the opportunity is going to be. That is why I said that it is going to be a difficult index point of view here but there will be a lot of opportunities in stocks and it may come in the next month or so.Sonia: Last year although the Nifty was up only 2 percent, there was a lot of price damange in a lot of sectors and stocks, so if you had to avoid, one-two sectors in the first half of the year, which ones would you stay away from?A: We just spoke about banking. There is not going to be a lot of clarity because certainly it seems to be in the vortex of the storm. So this seems to be a lot happening there and lot of fluidity and lot of surprises and that is what you don’t like in the market. You like a sudden consistency clarity and that is why I come back to the thing that even though consumption stocks are beaten down, I know that the theme is not destroyed. Consumption as a concept, as an investment case is not destroyed.Sonia: Stocks like Asian Paints etc -- after getting hit 25 percent, there is absolutely no recovery?A: Let us see what numbers come out, these stocks may give you an opportunity of a lifetime, who knows. I don’t know.Latha: You said charts of consumption stocks is not destroyed?A: I am saying the theme of consumption or as an investment case, I don’t think that it is out of the wind, things may have got postponed or delayed but I don’t think that the story is gone, the story is over.Latha: Is IT a relative safe harbour?A: Kind of but at the end of the day, if you are in the right midcap stock you make money otherwise at best you are protecting capital.Anuj: 8,145 right now. At what point would you say that this is now time to go out and buy this market? Everything has been thrown at it and it has just moved on. What would be that threshold?A: I would do that in two stages. 8,275 is what I mentioned earlier, would be this threat to 8,000-7,900. That would get taken care of hopefully. It is only beyond 8,600 where you talk about a full reversal and maybe getting into new highs. So, I would look at these two levels, 8,275 and around 8,600. As I said, it is not going to be a year of run away, it is going to be a year of clawing back and you are going to have these back and forth, so it is going to be a lot tougher year, I think.Sonia: So, what about compared to global markets? The Dow is almost at 20,000. So, it has been a great performance for them in 2016. You reckon that we could continue to underperform not just developed markets but other emerging markets as well?A: I do not think it will last for long. If you look at FII flows, one very important thing, I just want to digress and talk, is this whole FII-DII thing. We have had negative FII Rs 10,000 crore kind of situation and the DII has been 2x-3x positive. So, that is very fascinating. If you plot month-on-month performance of the Nifty, you will see it totally correlates with the FII flows. In spite of the DIIs buying a lot more, yet they do not seem to be able to decide the direction of the Nifty. The FIIs ultimately do. A quasi representative of FII flows is your dollar. You will notice that even dollar appreciation very often coincides with just a few weeks lag to what FII flows are.So, to see what the FII trends are going to be and specially, that has a case for emerging markets and developed markets is that just about three months ago, the dollar index was something about 96 or thereabouts. It was 94 or something and it kind of took off and went to 103. So, you had almost a 10 percent appreciation on the dollar in three months. The thing was not just the quantum, it is also the speed and unexpected nature. So, whenever markets get taken in such sharp moves, which are so unexpected, I do think that you have that counter effect, which is like this large FII flows for the last three months.But what does the dollar look going ahead, which is going to be the central trade for all global markets and asset classes. My target for the dollar index is around 108. But that is about only 5 percent from here. The beauty is that to some extent, everyone has accepted that or everyone has kind of built into it. So, though we are going to see a greater strength in the dollar, going ahead, it is going to be more calibrated, more expected and smoother. You have a 10 percent move in the dollar, in three months and the markets are not prepared for it. You do see that kind of effect, the kind of sell figures we have seen in emerging markets in India. But going ahead, I do not think it is going to be so bad. I am not saying you are going to see huge flows of FII money, but it is not going to be as bad as the last three months.Latha: So, what is your safe harbour for an Indian investor and across asset classes, I am not saying just equity?A: The safest hub for Indian investor is Indian investor itself. If I am an Indian investor, the way what is happening to bank rates, fixed deposits, which are your alternative, post tax, they are not going to be so good. That is one.Number two is real estate. The ticket size and the turmoil in that thing is not looking good. Gold as an asset class -- if you look at the gold charts, I do not think it is going much. With equity and the dollar strengthening, gold is not going to do much. With demonetisation is a very big plus for equity markets. A lot of money is going to come on board. Once it comes into banks, it is not going to find itself. In the stock market, we had this very big dabba trading culture and a lot of unofficial money lending, etc. A lot of money is going to come on board and that is going to result -- so, I expect that these DII flows are going to be robust. People are asking themselves, questioning themselves, but I think this number is going to be there more because of structural changes than purely the index play there is. So, I think that the big saviour for this market is going to be these DII flows, which are going to be consistent through the systematic investment plan (SIP) route and that is the big positive.Latha: So, if 7,950 does not hold, what is the next level you will look at?A: That is worry. Then you open down to levels of 7,500 and of course, it can even get worse. We can discuss that some other time. But that would be very worrisome and it would be a little bit of a pain. But I have my fingers crossed for 8,275 to 8,600 on the upside.Sonia: Okay, we do not want to be more pessimistic on the first day of the new year.A: Definitely not. And very often, in this point of pessimism, when we are all gloomy, etc you have opportunities and that is how the larger money is made. So, that kind of thing, that thought, having spent so many years in the market, never leaves me. So, I avoid getting too gloomy.Anuj: It happens, but could this be similar to last year where the market bottoms out on Budget day and then starts to move up. And we have a bit of a replay of last year at least a 4-5 month period.A: I hope so. As I said, beyond all this logic and numbers, etc a certain amount of gut feel, a certain amount of experience or wisdom sets in. That is when opportunities are there.Anuj: Are you getting any stock on the cheat sheet?A: No, I am not.Sonia: And what is your New Year resolution from the market’s point of view?A: No. To some extent, you cannot force yourself on the markets. If you ask me in September, it was very different and if you ask me in December it was very different. So, somehow, you just want to go with the flow. It is just important to be disciplined and do what you are supposed to do. You do get swayed and taken in, but it is just about me. I know what I have to do, it is just my own ability to do what I have to do.