Wealth-Creating Trends Exist Even In Volatile Market, Says Atul Suri
Atul Suri says money can be made in a volatile market.
Volatility rises and falls but investors can make money if they can identify correct trends, according to Atul Suri. The current pullback after a record-setting rally is no different.
“Markets will now bifurcate," said Suri, chief executive officer at portfolio manager Marathon Trends Advisory Pvt. "Some sectors will do well and some won’t, but we will have some trends and opportunities to create wealth.”
India's stock market was driven by a retail frenzy since the onset of the pandemic, driving it to new records. But it's turned volatile after pulling back from October highs as analysts started raising concerns about valuations.
Suri likened the markets now to the consolidation period of 2004-05 and the post-2009 phase.
“After the 2000 IT bubble burst, the market fell almost 49%. But between May of 2003 and January or February 2004, it saw a compressed spring-like-jump of 120%," Suri told BloombergQuint's Niraj Shah in an interview. After a sharp rally, consolidation comes and, in line with that, the market "went sideways” in 15 months after 2004.
In 2004-05, when the NSE100 index was down more than 6%, 70 of 100 stocks were positive, with some even gaining twofold, Suri said.
“Even during the 35-month consolidation period after the 2009 rally, the advances-decline ratio was 40:60 but on a net basis, trends could be identified,” he said.
“We marry fundamentally good stocks with good entry and exit disciplines based on prices,” he said. “We don’t fall in love with our stocks. Once the trend is over, and the investor has made money, we move out of that stock regardless of how good or big it is.”
Key Themes
Speciality Chemicals: Marathon Trends has been invested in speciality chemicals for the last two years. "The sector was under-researched and had mostly midcap stocks," Suri said. "For the last five years, companies in this sector have delivered good earnings along with having good fundamentals"
Price trends for speciality chemicals stocks are outstanding too, according to him. "They corrected less than the market during Covid-19 fall and are now part of a larger and long-term trend."
IT Index: Marathon Trends remains overweight on the IT Index. "IT stocks have run up and may enter periodic consolidation," Suri said. "But just like speciality chemicals, IT is now a part of a larger and a long-term trend."
Suri said the "market rewards good numbers, and excellent growth is visible in a lot of mid-cap IT companies". "With time, a lot of these mid-cap IT companies will either transition or are already knocking the door towards becoming a large-cap."
Real Estate: According to Atul Suri, real estate companies are showing signs of coming out what he describes as a "10-12 year bear market". Earnings across the board may not be consistent but that may be because it is too early in the revival cycle, he said.
Marathon Trends' portfolio is "overweight" on realty related businesses as well. While realty index may have fluctuated, he said, businesses like home improvement have only benefitted from every market reset event like demonetisation or goods and services tax rollout or Covid-19.