"We are not going to be a runaway market. We are going to see churns; we are going to see growth some day and value some day. All in all, I am positive on the market, positive on the year going ahead and positive on the opportunities it is going to throw at us."
It has been a good start for 2022. Everybody thought this would be a dull, volatile year, but the first 15 days of price action is indicating we could be in for an exciting year!
Yes, I do not know about the year but it is very exciting. This beautiful rally has happened in the backdrop of volatile global markets. One, the whole EM basket, which we are a subset of, has done nothing. FIIs flows which had briefly turned positive had turned negative again. Coupled with that, the US markets are seeing volatility, especially in the tech space. Considering all those things, India is doing very well and we are pushing towards new life-time highs.
The brief underperformance that we had in December or so is getting caught up. It is, all in all, a very impressive market. But I am of the camp which believes that we are not going to have a runaway market. Globally markets are going to pause or be range-bound. Range bound does not mean that they will do nothing. A lot happens within ranges and ranges also are large percentage moves. But we are seeing a massive churn happening globally, away from growth to value and this is very evident in the way the US markets are panning out.
If you look at the movement of the Dow versus the Nasdaq, a very simplistic way of looking at growth and value is that we see very divergent performances. Even in the Indian context, in the last 15 days, we have seen that growth has taken a bit of a pause and the value rally seems to be pretty strong. So in a longer timeframe, we are not going to be a runaway market. In this, we are going to see churns; we are going to see growth some day, value some day and that is the kind of play that is happening. All in all, I am positive on the market, positive on the year going ahead and positive on the opportunities it is going to throw at us.
If you compare your portfolio top of 2021 versus top of 2022, how many of the top five stocks are still the same?
At least 25% to 30% of my portfolio pushed to lifetime highs. Just to put it in a sectoral or thematic manner, we are extremely overweight on specialty chemicals. Since the end of '21, it was a bitter, tough kind of period for specialty chemicals. We saw them correct but in the first 15 days of this month, many of them have actually pushed to lifetime highs and in fact have gone substantially higher. So 25-30% of the portfolio has pushed towards lifetime highs and higher.
We do have some spaces, especially the more defensive areas – some of the FMCG, consumer discretionary, pharma plays – which are struggling. But as I said, this year is not going to be a one-horse or a one-way theme. We are going to have phases when we are going to get bullish about something which might disappoint and when we get really bearish about something, we are going to be surprised on the upside
It happened in Nifty. We were at 16,800 and things were looking pretty nasty about a month or two ago and suddenly we are again pushing near lifetime highs. This year is going to see a lot more of that. We are going to see a churn within sectors, within stocks and it is the ability to be able to have secular themes in the portfolio which is going to reward us. Just as I mentioned, specialty chemicals is one such area which we are extremely overweight on. Another controversial thought process is tech. Tech is getting beaten world over but we personally think that tech is again a very big large theme and at Marathon Trends we are not looking at a quarter or a year, we are talking about 5 to 10 years and we feel that tech as this corrects is going to also be a very interesting opportunity.
If one looks at tech in India, it is very different from what is happening in the US. In the US, a lot of tech stocks have taken 40% to 50% hits. In India, we are more a play on services. The company numbers that are coming out are good. The narrative has been good. So this year things are going to be up and down; sometimes it is going to be growth, sometimes value, sometime this sector, sometime that sector. If one stays with secular growth themes, one can come out as a winner by the end of the year.
So one is better off buying tech versus IT and you would say go for tech/IT rather than banks/NBFCs?
Again at this point of time, it may not seem to be the right thing, but by the end of the year, I would be better off in technology. I still think the secular theme is a decadal theme. The thing that is really changing lives, changing businesses world over is technology. Businesses require backend, services and India I think is one of the biggest providers of these services and I am here to benefit whether it is autonomous cars or whether it is online banking or whether it is any other theme that is playing out. Whether it is the metaverse or Bitcoins, the backend work is happening in India and I feel that Indian tech will be able to weather it. Tech is out of favour right now but by the end of the year if I am looking at a larger trend, we will be well off in that space.
Define tech for us. You are a listed market investor and in India tech means IT services or those four, five companies which have gone public whether it is Nykaa or Paytm or PolicyBazaar. How are you building up the whole tech component in your portfolio?
Atul Suri: For me, clearly it is services. For us, earnings is a very important starting point. We really are not investing in the thematic space of the innovation space. We have seen that whether you study the history of Tesla or Amazon or Apple, you realise that these are also great companies. They were thematic companies for many years but they really did not do anything for shareholders and were dog stocks for long periods of time. It is only when it translated to profitability and the earnings came, the wealth creation happened. For us also, whether it is the Nykaas or the Paytms or Infosys or the Wipros, we are agnostic to all that. The question is are they able to give me reliable consistent earnings? I think that once that comes in, the shareholders get rewarded.
At the moment, as I said, we see it in services play and we find that there are some very interesting opportunities in the midcap IT services space which have done very well and which continue to impress with the quality of numbers and a lot of these are going to transition from being just midcaps to largecaps. That will be a very sweet journey for us. It will be a low volatility trending kind of a journey and that is something which we look for.
So as I said, whatever the sector is, ultimately it is earnings that drive prices. For sustainable price movement, one needs earnings and whether it is tech or any other sector, I think that is the principle that we continue to follow.
What about motown and electric vehicles? Over the weekend, Delhi government is mandating Zomato, Swiggy etc to have EVs in their fleet. Hero Moto is increasing its investment in Ather; Tata Motors has anyways set up its big subsidiary with TPG. Is that a theme that you are looking at?
As a continuation of the previous question, these are all themes at play; these are the stories. We have to see which company is going to be able to win the race. Fortunately or unfortunately, we are in a world where the winner takes all. We all talk about Tesla and not about many other also-rans. The important thing is whether it is a two-wheeler, four-wheeler, MCV or LCV, whenever growth is translated into numbers, that is when we will be in.
We find it very challenging and very risky to try to bet on themes and concepts. For that, one has to go and look at the performance of the ARK Innovation Fund run by Cathy Wood. She is a marquee fund manager who was the toast of town, the ultimate storyteller. You can see what she was or what the fund did a year ago and where it is today. So all these things, which are not backed by earnings, always run the risk of being a bubble kind of behaviour. That fund may take back or pull back, but the kind of volatility that we see – 50-60% drawdowns is not what I aspire to give my investors. We look for low volatility trends and for that it is very important that this EV or whatever story translates into consistent numbers.
When the numbers come, the price behaviour that happens is much more secular and much more solid and that is how I view it. That is my prism of viewing even the whole innovation and tech. I use those products but the ultimate bet is going to be who is going to be the winner because in this industry, the winner takes all – be it retailing, where there is Amazon or a Netflix. That bet is ultimately going to be the rewarding one.
The pain in the failures is tremendous and that is something I do not want to take. So I may be a little late, I may wait for the numbers to emerge, but I have noticed that even after the numbers emerge, the runway is long and there is a lot of money to be made after that, in fact the best money is made after that.
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2022 not to be a one-horse theme; bullish on specialty chemicals, tech: Atul Suri have 2105 words, post on economictimes.indiatimes.com at January 17, 2022. This is cached page on VietNam Breaking News. If you want remove this page, please contact us.