Quality is not just about the market capitalisation, it is about performance, said Atul Suri, Chief Executive Officer, Marathon Trends - PMS.

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Speaking exclusively to CNBC-TV18, Suri feels that crude oil prices will go beyond $80 in few months, "In fact, I feel few months later, we will see crude higher than where it was. I see crude going beyond $80."

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Time wise consolidation quite healthy for Indian markets, says Atul Suri

In a bull market, you have phases of consolidation. Consolidation or correction can be of two ways, time wise and price wise, said Suri.

Edited Excerpts:

What has been the lesson of last one month because we had three days of massive downtick and then three days of equally sharp bounce - is it going to be that kind of year?

I think, this year it's not going to be more about indexes. The moment you start to get bullish, you will find that the market will surprise you on the downside and the moment you start getting bearish, the market will surprise you on the upside. So, essentially it will be very range bound and the range will be large. You will have a market that will wrong step you at every turn and look of consensus bullishness or consensus bearishness and that will give you a clue to turning points.

But, irrespective of that what is going to happen, is that quality is going to reassert itself and by quality, I just don’t mean largecap, quality in the large and midcap space, which actually has been bit of sufferer in the last two years. It is going to be very different from the last two years, where things were very secular, runaway, smooth, and everything and anything went up. In fact, the smallercap went in a reverse order. So, I think this time, the order is going to change and where you are going to find excellent opportunities and great wealth creation ideas is going to be in quality.

As I said, quality is not just about the market capitalisation, it is about performance. In these numbers that came in the last few months, you are able to identify very easily. You are also seeing it in stock performance, sector performances. Like, there are some sectors which are higher than the January highs and clearly you can see that it's fast-moving consumer goods (FMCG), consumption, information technology and some of the private banks. They may be expensive, people have hesitation about getting into it, but I think this is where you are going to have returns coming. It is going to be much easier than try to just predict the index.

Equally, the midcaps and smallcaps are seeing some excellence as well?

If you look at it today, the Nifty maybe four percent from the life-time highs and the midcap index is 14% and the smallcap is 18% , had gone to 22%. They have done very well in the last two years, but the drawdowns that have happened, so for all investors who came in late to see 20-25% of your capital getting knocked off. Generally, investors came in last. Most people were not investing in smallcaps two-three years ago, although smart money was in it. But, if you see the euphoria, the kind of guys are hungry for whatever is moving have come in the last 6-9 months and they see that from their capital money getting wiped out, that is big painful.

Especially retail investors?

Yes, it is nothing new and keep happening. People blame ABC, XYZ but people have themselves to blame for it, when you just chase returns and you do not chase styles. When the market is going up, people want smallcap returns and when market is coming down, you want large cap drawdowns.

You said market will move in a wide range – at the moment it looked after last few weeks of volatility that 10,300 on Nifty would hold, you are not so confident?

I guess, even 10,300 – it will come to 10,200 and then people will say 9,500 and, 9,200 and then the market will go up. This is not just in India, it is happening globally. Companies are performing, numbers are coming through. It is just that we have to get used to that very slumber bull market that was here, which is not going to happen. In this volatility, the only way to avoid getting chopped or whipsawed is to stay with quality stock, companies, which are delivering numbers. Like yesterday was just the antithesis of that. If you look at the end of the day, the best performing stocks or quality was all negative and whatever was real poor in quality. So, it stood out as a short covering rally yesterday.

What stage of the bull market do you think we are in right now, have we reached some sort of a mature stage?

I don’t think so, in a bull market you have phases of consolidation. Consolidation or correction can be of two ways, time wise and price wise. So, if we have a time wise correction that is the most beautiful situation and if we stay within a 1,000-point range and spend time it is okay, because quality will reassert itself. When poor quality leads the bull charge, then the ending is very horrific.

However, if quality has a chance to catch up, take the next step – create new leadership and then the rest of the market can catch up. So, I feel we are in a consolidation phase but I feel there is going to be a lot of money made. I think, the trends are very clear in some spaces, some stocks, some sectors and that would be a very smooth ride.

Two other assets classes’ crude - what is the trajectory near term and rest of 2018 and dollar rupee?

Crude and US bond yields had run up sharply and if these asset classes run away vertically, they create a global mayhem. There has to be some corrective action, which we have seen in terms of statements but there has been no production increase, they are just statements.

So crude can correct further and come to around $71 but to think that crude will again go back to our dream situation how we like it in India, then the answer is no. In fact, I feel few months later, we will see crude higher than where it was. I see crude going beyond $80. I see US bond yields going well beyond 3% but there will be difference this time. Markets do not just like or dislike any event, they like it, whether they are prepared for it or no.

First Published:May 29, 2018 7:06 PM IST