Decade-long rally in banks over, IT & pharma to rule: Atul Suri

One clear sectoral winner globally is technology and that is going to find representation in our markets and in the kind of leadership that we will see going ahead, says the Founder & CEO, Marathon Trends-PMS.

Is the party over? Do you think we peaked out for the year or this is just a routine correction?
For a market that is up almost 57% in six months, a 3-4% decline is not the end of the party. We can fall further and it is very much par for the course simply because after the percentage and the speed of gain that we have had, markets do correct. They are not obliged to go up every single day, every single month. So a correction may have started a few days ago and mind you this is global in nature. It has nothing to do with India. We can find reasons here and there but the fact is it is global in nature and it happens because excesses happen.

There has been a lot of retail money, a lot of Robinhood trade kind of play and people are just chasing momentum and they have really moved down the quality ladder. It is customary for the market to correct at such points. We have given back about 3-4% from the top. I would not be surprised even if we correct another 3-4% and probably come down to something like 10,800 or thereabouts where the 200-day DMAs are and this goes for not just India, it goes for global markets.

If you look at the Dow, you realise that these markets can correct a few more percentage points but I feel that will be good because a lot of froth has come in, a lot of nervous players, a lot of people just sitting and buying whatever makes the 52-week high. Life is not so simplistic and a clean-up is necessary because momentary or temporary clean-ups help in keeping the market healthy.

If that does not happen very often, the bubble becomes very large and then it ends in a very nasty manner. Personally I am not so fazed. I feel that at lower levels it is a great opportunity to buy. IT and pharma clearly stand out as massive trend reversals and I feel it is an opportunity to buy around maybe 10,800 or so.

10,800 means you feel that today or this week, the market may not bottom out and in the short term 3-5% kind of correction cannot be ruled out?
It is possible. What is really worrying me globally is the way the dollar has spiked. One of the biggest reasons for this global move and that is happening across asset classes is the weakness of the dollar which really is because of supply of dollars into the system that we saw yesterday and day before yesterday as a kind of reversal.


The DXY was around 93.68 where it closed. If it goes above 94, it could lead to a little more cooling down in the risk on assets and that is why you will find that the hit is highest in the commodity stocks. A little buoyancy in the dollar may lead to little cooling off but this is not a trend reversal. I feel that this is a correction and these corrections are good and healthy for the longer term trend of the market. I would use this correction to increase my allocation towards IT and pharma.

Given the kind of projections that are coming in, what kind of average return is it reasonable to expect in the next year or so?
All my presentations end with the client asking me that question and that is the question that I cannot answer. But the fact is if you put things in perspective, three years since 2018, the index has been where it is. Investors as a whole have not really made a lot of money. Sometimes you had a move in banking. Sometimes you had a move in IT. But there has been no substantial rerating in the market. You can almost say that the market has been in a range for the last three years or thereabouts.

Very often when markets have such long ranging patterns, when they come out of it, there are explosive moves. I feel that the market in the next year or so, is going to have an explosive index move and as I said earlier and I keep repeating it, the sectoral leadership is changing. There has been a tectonic shift in IT for that matter. Post leadership in 2000, for 20 years, barring for certain movements of flight, IT really has not been the leadership sector. In terms of weightage, it is probably second after banking.

So the fact that we are seeing a multi-year or decadal change in trends away from banking which led our markets for the last 10-20 years and was the outperformer. If you had private banks, the last decade really would have been fantastic. I feel this leadership is changing and that is going to be very big. It is not a question of three months or six months, but the way IT is shaping up, the way pharma is and this is not just in India, this is global.

We say banking is weakening out but if you do a relative chart of Bank Nifty versus Nifty, you will find that as far as the ratio goes, we are at the lowest point as of today. The index has bounced 50-60% but the ratio or the relative outperformance, underperformance banking is really struggling. And this is not just in India, this is global. If you look at European banks, they are a disaster. You had some issues with HSBC, etc, yesterday. So these are really a global trend that is happening. The leadership in banking is moving away from the standard brick and mortar banks towards the digital space and one very big disruption is happening here and that is getting reflected. I feel that the decade of leadership in banking has come to an end and the baton is going to be picked up by technology, pharma or some other players.

There are a handful of names on the index that have continued to move from strength to strength. Pharma and IT aside, there are a handful of names outside financials like in some FMCG stocks, Reliance. Is there merit in those stocks rather than trying to scout for new opportunities?
Yes that is very true. It is very true that opportunity is coming out. Like you mentioned Reliance. One does not know how to classify Reliance. Is it energy, oil component or technology? So there is a bit of a very big representation of the technology play through Reliance also.

Whenever markets fall a lot like we had seen in March, a shift always happens. There are new realities and these realities come about due to a few factors. First and foremost is technology. Demographics of government policy and what we are really seeing is that the technology shift that has happened. The Covid crisis is not going to leave us unaffected. One clear sectoral winner globally is technology and that is going to find representation in our markets in the stocks that we have and the kind of leadership that we will see going ahead.

There are great opportunities and most portfolios are underweight. Most portfolios are overweight banking and finance. They may move to equal or lower weight and that shift itself is worth a lot of money and that is going to be the big move that we are seeing. It is work in progress and it is the starting of a multi-year trend from where we are right now.

Many companies have managed to rationalise their cost structures and efficiencies and managed to deliver on that account. Is there anything that has surprised you in that context?
What has been very impressive is that a sector which is getting clobbered -- speciality chemicals. This is a sector again that was doing well even before in pre Covid days orld and even in with Covid, this sector and stocks did well. There is a bit of momentum and froth and so they will correct in the short term, but I find that government policy has been a very big trigger and this is again a trend that has been playing out and continues to play ahead. Companies are executing very well and delivering good numbers even in difficult times. So for me, specialty chemicals is a function of execution and opportunity due to government policy. As I said, things are frothy in the short term and you will get better buying prices but I would think that these are larger trends at play and I would use the dip at certain point to actually get into them.