Is there an investment opportunity in PSP Projects shares?

(Equities will remain the most preferred asset class for investors though the returns will be muted in the coming months compared to the last couple of years, feels Atul Suri, CEO, Marathon Trends Advisory. Speaking to News9 as part of the Market Mavericks series, Suri advises investors to buy on dips whenever markets are selling off or in panic).

Q.1. Over the last few days, the stock market has seen heavy selling. What is your view on the future of the market?

If you take a somewhat broader view, the genesis of the issue is that inflation has been pretty much on the boil for the last few months. Commodities have been rallying for quite some time now, more so those that impact inflation in a big way. One of India’s largest imports is crude. You will see that crude oil has been rising on the back of Russia-Ukraine tensions. Russia is a very important player in the OPEC-plus cartel.

So, there is a worry that if crude takes off in case of any Russian misadventure, that would lead to inflation and could really affect markets. Based on inflation worries over the last few months, the US Fed is going to respond with rate hikes. The issue that is coming up is how many hikes there are going to be and how aggressive they are going to be.

But it’s very difficult to put out a perfect road map because it’s linked to what happens geopolitically, what happens to commodities and the kind of revival that happens in the US.  So, at the moment the big issue in global markets is going to be the rising interest rates and whenever that happens, the risky assets or the very expensive assets come under check.

So, the whole move will be from growth to value. The poster boy of growth is the Nasdaq. US tech dominates the global scene and you will notice that that is where the bigger pressure has been. It has a knockdown effect on emerging markets.

Also, that’s why what you are seeing in the last week we had heavy FII selling. It’s not just that the selling was there, but we had a rare week where the domestic institutions were totally absent from the market. When you have a market that is seeing big selling and the buyers vanish, that’s when the price impact is massive.

However, the market volumes are not very high, it’s not in sync with the kind of destruction we are seeing in terms of prices. At this time, the transition is from growth to value which is putting pressure on the market.

Q.2. Do you think that the correction should be used by investors to buy or they should exercise caution and stay away from equities until the volatility subsides?

After the 2020 lows, we had a big bull market and Nifty saw a 140-150 per cent kind of up-move which is massive. Obviously, when markets see such a spring action, they need to consolidate. I think that the next few months will be more of consolidation.

I don’t think it would be a time that equities are not a chosen asset class. I think it’s still going to be the most preferred asset class, but no longer will they have the returns that they saw in the last year or two. That’s why it’s going to be a bit of a frustrating period.

When we all feel bullish, the market will disappoint. A few weeks ago, Nifty had gone to 18,300 and was a whisker away from its lifetime highs. People said we are going to go to 19,000 and the market was disappointed.

Similarly, a month ago the Nifty had gone back to 16,400 and everyone got bearish and it surprised by going up by almost 1,900 points. I think this phase in the market will remain for a few months. For trend investors, equities are the asset class to be in.

Instead of waiting for breakouts and confirmation, one should invest in dips or whenever markets go through moments of panic. When there is absolute consensus on bearishness, that’s a good time to invest.

Q.3. You have been a proponent of trend investing. Can you briefly explain what this style of investing involves and how it is a rewarding style for betting on sectors and stocks?

Essentially, trend investing is to be with the leaders. Over the last 10, 15, 20 years, stock indices have been going up, but all stocks are not rewarded or all sectors are not moving the same way. From time to time, leadership changes in the market and some sectors do well.

As trend investors, what we try to do is determine those sectors or stocks which will outperform or where there is leadership. So, what you are trying to do is to find a trend that is essential to find leadership and invest in them. Trend investing is nothing but leadership investing. It’s very important to find the trend obviously.

The first step is you look at earnings which are the ultimate fuel for stocks. So obviously you look for stocks and sectors which show acceleration in earnings. Secondly, the earnings get reflected in prices. The market is quick to recognise them and you will find that they especially stand out in falling markets. In a bull market, everything does well.

But when markets are correcting you will find that some stocks or sectors tend to do well even in falling markets or they don’t fall as much. And lastly, and the most important part, is to exit because no trend is perpetual and no trend is infinite.

There is no single stock you can own for all your life. So as a trend-investor, our job is to exit the trend as and when we feel that the trend is over. To summarise, our style of investing at Marathon Trends, we are a multi-year trend investor.

We look for stock themes that are likely to play out in the next 5-10 years. We are long-term trend investors and in this, we try to look at companies that have a very thematic story playing out and we take concentrated bets in these areas.

We feel that this is what rewards the investors in the long term. And the basic thing about investing whether it is trend investing or anything else is discipline. As long as you have the discipline and you can cut your losses and drive your winners, you are fine.

Q.4. So where do you see the opportunities in the current market?

The themes that we like are unfortunately not in favour right now because leadership investors tend to be more growth-oriented and growth stocks are a little out of favour, though I feel that this actually provides an opportunity. For example, we like technology and we are going to use this fall to consolidate or enlarge our position in technology.

This may appear to be counter-intuitive because you see tech stocks being hammered in the last few days. But again, in technology one needs to understand which ones are the digital platforms companies and which are services companies. Some of the services companies provide excellent backend work globally and we think there is a long runway.

So, we are bullish on the whole services space. They are going through a difficult time right now. The other area that we like is speciality chemicals which at the moment is on a bit of a plateau because of rising crude prices, which is a very important raw material for speciality chemicals.

But we feel it’s a megatrend in play. We invest for the long term and a few good or bad quarters don’t really change the story as long as the basic theme remains constant. However, I feel that in the latter part of the year inflation will not be such a concern.

The reason being that the whole rise in commodities is not a case of demand for commodities going up exponentially but more a case of supply chain restart. As time passes, the lockdowns get over and people get to work, all the bottlenecks that are in ports and manufacturing etc will open up.

In the second half, we will be back towards growth because if you look on a decade basis it is growth that has rewarded investors though in-between pockets of value has worked. We remain long-term growth leadership investors.