Atul Suri on what it takes to be a winner in the market

This market is the representation of people with higher discipline making more money than people with poor discipline, says CEO, Marathon Trends.

In IT, have we topped out for the moment or do you see a consistent build up there particularly as things continue to improve?
The first sector index to break into lifetime high was IT and it still does. Most of these others are playing catch up, even pharma is not at life-time highs, it is just doing a catch up of multi-year underperformance. You have to respect the first sector that breaks out into life-time highs and that is IT.

IT actually never had it very bad either. I think the sector that breaks into life-time highs and with many of the larger components leading and the more interesting part or the very interesting hunting ground is what is happening in the midcap space.

If you really pull those companies out, we realise that the numbers that have come have been very impressive and that is also supported by momentum. So ultimately, the game as I play it or as I understand it is to look for companies that are quality and use momentum to optimise your entries and exits. IT is one such space which has broken out into life-time highs. I do not think that it is going to end so soon. It will correct, the markets will correct for sure and the correction will hit all these sectors and stocks for sure, two to three years down the line, these sectors or themes would do far better wealth creations than looking for a new rotation every week in a new sector or a new stock. It is backed by fundamentals, quality and earnings. Why would I like to refuse momentum? If it comes it is always welcome.

Pharma is in a multi-year bull run. There is a tailwind but ultimately it is about risk management. How deep would your stop losses be in pharma, 10% lower, 15% lower or you would not have stop losses at all for pharma?
When you invest, you have to look for two things – one is the change in the underlying earnings. Very often prices may correct but that may be a function of markets or one off. However, if the underlying fundamentals have not changed and the theme has not changed, you realise that you do not put those price targets or price stop losses.

Let us take the case of speciality chemicals. They were doing very well pre-Covid and when the market fell off, you realised that they have also corrected. They corrected 20-30%, but what happens is that the moment the market stabilises, these quickly moved toward life-time highs.

So what will happen is nothing changes on the fundamentals. In fact, it has improved in a lot of them. They have improved and the numbers have come better. What happens is that if you put just price targets or price stop losses, if you are an investor, then the market will shake you off. However, if you are a trader, it is just not difficult what to buy. I mean the screen is telling you, your friends are telling you, yours Whatsapp groups are telling you. It is no rocket science what to buy. What is going to be important is when you sell. Whether you sell at a profit, at a certain target or you put a stop loss and the importance and the discipline of keeping the stop loss is very important because that makes sure that you take some money home.

These stop losses, mentally talking, whether it is 5% or 10% is very easy but very difficult to implement. There is a beautiful line by Mike Tyson and one of my favourites is that “everyone has a plan till you get punched in the face”. So that happens. When markets correct, the discipline of sticking with your risk management is the single most important quality for survival and making wealth in this market.

I know there are a lot of retailers in the market, who are trading and are making good money which is fantastic. When markets correct, please have the discipline to stop losses. If not, the ending tends to be the same. In the end it is your discipline that will help you make money.

When a bull market starts, it is going to be a multi-year phenomenon. When a stock like Titan was in a crazy bull run, it had corrected three times, more than 30% and twice more than 50% and yet it turned out to be the multi-bagger of the decade.
Absolutely. I mean that is very true. So that is where a price stop loss for investors or for a trend player is not the right way. What you will have to see is two things – one is a change in trend on the underlying earnings story. Is the whole business compromised and this can happen. However bullish I am today, I have to realise that nothing is permanent in this market. You never know. Pharma was a crazy bull run from 2009 to 2015 and then you started having this US FDA issue and things went for a toss.

By now, we have to all realise how fickle everything is and nothing is permanent. I mean even the great investors like Warren Buffett, look at the sales in airline stocks or whatever you have. So it is important to be flexible, to change and most importantly be disciplined.

This market is not represented by people with higher IQs, making more money than people with poor IQs. This market is the representation of people with higher discipline making more money than people with poor discipline that is it.