Market likely to see consolidation, dollar strength to pressurize commodities: Atul Suri of Marathon Trends-PMS

The market is getting into the second phase of the bull market and it needs to absorb the run, while we will see some consolidation now, says Atul Suri of Marathon Trends-PMS. He believes the corrections in the market are good as they reduce over-optimism and high leverage.

“We have had a dream run. The Nifty is up 120 percent in the last one and a half year, and the move has almost been vertical. And such fairy tales and dreams do not last forever. So I think we are getting into the second phase of the bull market, which is something that we have seen in 2003,” said Atul Suri of Marathon.

Indian market to remain volatile, expect correction of 5-10%: Avendus Capital

Giving instances, Suri noted that the markets had a similar bull market in 2003 where the Nifty had almost doubled. And then in 2004, 2005, markets went into a bit of a consolidation phase. The same thing happened in 2009. After the big crash in 2008, a pullback was seen in 2009 and markets were sideways in 2010 and 2011.

“So markets need to absorb the run. So what we are really seeing is that we are in a bull run, and I think we still hold our targets of 17,500 Nifty, but now the journey is not going to be linear,” he added.

The dollar strength will lead to a bit of cooling off and there could be some pressure on the prices of commodities, he said.

“The global markets have corrected 4-5 percent. So I think that this correction is global. The key reason is the rally in the US dollar, the DXY, and that I think will give you a clearer understanding where the globe is moving slightly to risk-off,” he said.

Also Read: Market optimistic about Fed taper but dollar could be indicating risk-off: Bank Julius Baer

However, he believes the bull market is still intact and a correction will be an opportunity to buy. However, in the short run there might a little corrective which is very important for the overall health of the market.

“In the short run, what has happened is in the last few days, you have seen a very sharp upmove in the US dollar, the DXY which is at which you know crossed a certain level of 93.5, which kind of confirms a double bottom and this points towards the dollar getting stronger. When the dollar gets stronger, what happens is then the more global macro mode moves into a bit of a risk of trade. So you will find commodities and equities tend to correct,” he added.

Also Read: Taper tantrum back, but this is still a bull market; buy quality on correction

Suri does not expect banks to outperform going ahead and expects to see a more stock-specific play in the next phase of the market.

“The biggest underweight position has been banks, and the biggest overweight position for us has been speciality chemicals. And that's a very divergent and brave move that we have made internally. Now what happens is that when I talk to somebody and say that we are underweight banks, the immediate argument is that, don't you think banks will do well? How will the economy function? How is the revival happen? These are great institutions, great banks, and they will do much, much better. However, the fact is that there's a lot of difference between companies doing well and stocks doing. So I personally think that banking as a space as an investment or as stocks, I don't think will be the outperformers. They have been laggards and that's been proven in the last few months,” he said.