India is like an FMCG stock, always expensive but creating wealth: Atul Suri

“If the global market makes a comeback, we will also do very well. I think we will have leadership status but India is like an FMCG stock. It will always be expensive, people will complain but you will create wealth and very often when markets fall these tend to fall less. We are the first market at global lifetime highs,” says Atul Suri, CEO, Marathon Trends-PMS.


It is looking like bulls cannot put a foot wrong! Whichever market I look at, it has made a comeback, some are up 10%, some are up 20% and some markets are up even 25% from the recent lows.
You have to look at it not just from last week. What happened last week was that the CPI numbers came out in the US and it was a bit lower than expected. So what was seeming like runaway inflation seems to have paused and that resulted in the US bond yields coming off. The US 10-year bond yields fell from 4.25% to 3.75% or thereabouts. The dollar, which had gone to 116, came to around 104, 105. All that resulted in a bit of a relief rally.

It is not that inflation is history; it is the first silver lining and this has resulted in a sharp oversold rally at best. I would say for the markets to have a reliable base, we need to see follow up or confirmation that inflation is out and then I see if US bond yields go below 3.5%. I feel that we will have a sustainable base and things will really take off.

If you see the nature of the rally, you will see that the rally has been highest. The Hong Kong market has fallen the most. Nasdaq has outperformed the Dow Jones Industrial. So the markets that had fallen the most, came up sharply and as we all know, the first leg of a bull market is a short covering rally. There have been a lot of bears. What if the bears went and shorted it in the last few years? It is tech and so the covering really happens. For this to be sustainable, there has to be more news coming out telling us that inflation is truly behind us, that it has peaked. If that happens, I see no reason why globally markets will not take off.

But in the eventuality that global markets do see some sustained underlying trend that inflation is peaking out, what lies ahead for India then? We outperformed while the rest of the globe underperformed. If they were to catch the higher alpha, do we underperform or do we stay as is where we are right now?
I think we will also do very well. I think we will have leadership status but India is like an FMCG stock. It will always be expensive, people will complain but you will create wealth and very often when markets fall these tend to fall less which we have really… we are the first market at global lifetime highs.

So there are two examples of FMCG stocks – HUL and ITC. HUL did not give returns between 1995 to 2000 . Will that happen to India or will we be Asian Paints which has been a steady compounder, has created the maximum wealth because in FMCG the definition is different?
Historically, India would be more Asian Paints kind of play. India has really stood out compared to emerging markets. It is not just the last one to two years, if you put charts from 10 years, 20 years point of view, you have to accept that.

Us Indians are the most pessimistic people. We always find everything negative. But if you look at it objectively and take a step back, stocks that fall less in falling markets are leaders of the next bull market and as far as this correction goes, which is about more than a year old, we are the market that fell the least, we are the first to break out to lifetime highs. To put things in perspective, Nasdaq is still 30% from lifetime highs in spite of all that has happened last week.

Practically there…
Yes we are almost there. On a weekly close basis, we were at a lifetime high.

Within India, what do you think will take the leadership? Will it continue to be the banking stocks?
I think that is an interesting space. A massive shift is happening globally. If you look at the US, the Dow Jones Industrial has done much better than the Nasdaq. Nasdaq is 30% from lifetime highs, the Dow Jones Industrials is just 10% from lifetime highs. So relative outperformance is happening in industrials and that is also happening in India. Sectors like capital goods, infra, corporate facing banks have done very well, in fact all these are at lifetime highs and well beyond.

Whoever wanted to touch PSU banks? Whoever wanted to touch PSU stocks? But these have actually done very well. So a very big shift is happening globally. Also remember, we are coming on the back of decade of underperformance, PSU banks have been underperforming since 2008, 14 years. Capital goods have done nothing for a decade so what will happen is that everything is cyclical, nothing is infinite and these people or these sectors are also going to have their moment of glory which we are going to see globally. We are going to move away from that pure new tech, new age kind of play and go back to industrials, commodities, manufacturing, to chains. It happens. It is cyclical and the pendulum swings both ways.

So it is going back to value versus growth?
No I do not think that is the right way. It will still be growth. Growth is what is going to make money globally. Ultimately we invest for growth. Value has its pockets or moments but it is going to be dominated by growth and the fact is that all these spaces can also be growth. Some of these companies are giving much higher growth rates, even than tech stocks.

If one were to take into account the last one year’s performance, the PSU index is the top index gainer. So this rotation which is taking place in banks, can it move away from the likes of an ICICI Bank? Do you have a larger allocation to PSU banks or would you bet on an HDFC Bank and a Kotak?
I would divide them into corporate facing banks and personal banks. The personal banks have done very very well. They have been the biggest wealth creators and due to the way the corporate cycle was positioned. My big call is that India is actually shaping up for industrial revival. Whatever I spoke about capital goods, infra, PSU banks, corporate facing banks, this really tells me that well we are going to see the restart of a cycle. I am not trying to draw a comparison but this is almost a déjà vu of 2003-04, when these sectors and stocks did well.

Siemens, ABB everything had run up…
Yes these were the sectors that actually led the rally and in that five-year rally, pharma did not do as good, IT did not do as good. After almost a decade, those sectors are taking leadership and that is the big shift that is happening in India. I am also seeing that play out globally.

So pure play capital goods, BHELs, L&Ts, defence, railways, construction… when you talk about industrial, it is mammoth there. What is that one pocket which is looking lucrative now?
Capital goods stocks are very interesting. There are a lot of plays in the electrical space. There are lots of midcaps. Even in autos, very interesting moves are happening. Auto stocks which are more linked to mobility, in alternatives and electrics, etc, are playing out very well and are actually in a bull market though the index per se has done nothing.

It has been flat for the year but there are some pockets that have done very well. I am a trend watcher and for me ultimately what matters or where I need to be is where the trends are and this is where the trends and this is where I will be.