Playing Contra? Why is Atul Suri no longer bullish on bank and IT stocks?

Atul Suri, CEO, Marathon Trends – PMS, says that over the next six months to a year, he will continue to favor the capex cycle, capital goods, engineering, infra and defence, the unglamorous sectors that have not taken off. A decade ago, but leadership will continue and in the long run, trends will continue to change.

Whatever happened on June 3 and 4 seems like ancient history.
Atul Suri: Yes, this is exactly the point; After spending so many years in the markets, investors are all about what’s happening in a week, a month, and people get upset over a 5% correction! I travel a lot and meet a lot of investors and it’s interesting. The change of mind is tremendous. Ten-fifteen years ago people never spoke. Even if they spoke, they never invested. Generally, I think people invest with that kind of time horizon. What we saw on election day two weeks ago was unbelievable. At one point, it was felt that the market might also go into circuit. But it was bought and two-three days later, no one even talks about it.

And only through retail. It was the biggest drop in nearly four years. But if you look at the long-term chart, our data indicates that the market has more than tripled in these last 15 years. Now when we sit here and look at the macro indicators, put them all together, that’s what you practice in your fund as well. What does the long-term path really look like from here?
Atul Suri: Now there is a word called Amrit Kaal, for want of a better word. But there comes a time in every country’s history when demographics, GDP growth, political continuity, all work together. And every country has this renaissance moment. Like, if you go to Japan, you’ll see that from the 1950s, after World War II, to, say, the 1990s.

There was an extraordinary bull market and all these things worked. In the US, between 1980 and 2000, the Dow moved from 1,000 to 10,000. It also happened in China. So, every country has these 10-20-year phases that I think the starting point is demographics, so it’s something that’s preventable.

Yes, in the short term, we can say Modi 3.0, etc., next 100 days, but beyond all that, every country has this moment of renaissance and India is also showing those qualities and characteristics and that’s why they said 10-year 15-year The time horizon is a fantastic time set and I think a lot of wealth is going to be created and you can see signs of this. When markets decline, falls are shallow and buy immediately. As I said we are far from incident. For six months we were thinking about the elections and the results, the market was not what it was ready for.

It represents a 7% decline in the Nifty. He adjusted himself very quickly.

Atul Suri: And interestingly, after these two-three days, the same areas, themes continued. For example, we were talking about defense. It is very closely linked with India and the current government, but you will clearly see that after two-three days of beating, they are all making new highs whether it is infra, capital goods, engineering. So, continuity is important and there is a huge mental shift and rightly so. I think retail or HNI investors hope they are doing well and will continue to do well for years to come.

But it is for someone who is probably in the SIP culture, pouring money long-term, but for those who are playing trends and trend watchers like you, the horses will stay the same but change course or have to. You think that for the next near term, say the next one to two years, you will have to buy more of it and sit tight on it.
Atul Suri: It’s a very relevant question because one obviously does what an index does. Actually, if you look at the index in January, the index was around 22,000 Nifty. Today, we are at 23,500. It’s not like it moves a thousand points a week. We are nowhere near that. Six months have passed. So, not much has happened at the index level, but many areas and many themes have emerged. So, right so you’ll definitely have index moves but there are some areas and themes that will really outperform. What I’m seeing in the short term and what I said after what happened two weeks ago is continuity.

First define your short term because short term means very different things to very different investors.
Atul Suri: I would say about a situation like six months to a year. From that point of view, the interesting thing is that the themes of the sectors that I still favor and it’s all about a capex cycle, are capital goods, engineering, infra, defense, you know those kinds of things that were unglamorous. Not going forward for a decade before that, leadership will continue and yes the reality of our markets is that long term trends will continue to change.

Sectors change, businesses change and it’s not that easy for anyone running an industry. It’s very easy for us to put up an Excel spreadsheet and drag it to the right, but the business will change, the cycle will change, and as investors we have to be aligned with that. But I think it will be a capex cycle and the stocks associated with this capex cycle will be the leaders. They are already performing and I think they will continue to do so.

What is very interesting in the last few weeks is that the Bank Nifty is reversing its underperformance over the last one year. Of course, 40% of them are only HDFC Bank which returns even close to the 1600 mark, but life is more than 50,000. How do you view banks?
Atul Suri: I may sound contradictory but I am not very bullish on banks and private sector banks.

You are the first to say that.
Atul Suri: I’m actually not even bullish on IT. Those are the two most favorite areas….

IT is almost a consensus trade. No part on credit at all.
Atul Suri: I prefer NBFC. I think there are pockets in the NBFC space that I am bullish on and that is what we have in our portfolio. We are actually a fund that is heavily underweight private sector banks.

But you are playing the lending game through NBFCs, especially SME or mid-level business lenders can participate in it.
Atul Suri: There are also some very high-quality lenders. There are some very high-quality lenders and I think we’re going through that. I think one of the problems with banking and especially private sector banks is its consensus boom; And it’s the top holding in everybody’s portfolio and everybody knows exactly, everybody knows about cycles and so on. I have been hearing about it since last year, but the stocks are not moving. The trends are not there. Consensus buy on HDFC Bank.

Of course, it is a great bank and will do well. He will move someday. But as an investor if you have such a large allocation, I think this is a bull market which, as I said, is about sectors and themes that haven’t done well for a decade. See Real Estate. A sector no real estate stocks wanted to touch but look at how well they are doing. This will be a bull market where most people will be in positions in private sector banks and largecap IT, but the bull market is actually happening elsewhere and that is the nature of the market. The market is never about consensus. It’s always about the pendulum swinging the other way.

That is where you earn big. So let’s break down that real estate issue a little more. You know the reputation of DLF, Oberois and the world, for that matter macrotech across India and then regionally. grandfather are emerging. They have improved balance sheets, good volume numbers very well. Do you have a mix of both? Are you going for All India players?
Atul Suri: No, I prefer players from all over India. Also, a big area of ​​real estate interest for me is one that is relatively clean. I’m not using it in the absolute sense, but I think it’s an industry that’s still a bit dark for someone who actually goes out there and buys real estate, especially outside Bombay, you’ll realize that it still has its There is gray, shades of gray and you really want to avoid that because when there is a lot of gray it never translates into long term wealth for investors.

Again in the real estate space I am very bullish on one sector but I favor the cleaner players as the benefits will go to the shareholders and will not be lost anywhere.