For next few years, this theme will dominate market: Atul Suri

You may consider these stocks too expensive but you will have to bite the bullet and money will be made, Atul Suri, CEO & Chief Investment Officer, Marathon 65242628 65145353 65245109 Trends PMS, tells ET Now. Suri says the main theme is going to be consumption and it is in price performance as well as numbers. Edited excerpts: The largecap stocks are in a bull market and Nifty is moving from strength to strength. On the other hand, in mid and smallcap stocks, the selling has been excruciating. Some of them have made a comeback but that pack has still taken it on the chin. What matters is the timeframe you look at. If you start looking at data from Jan 2018, everything looks painful in the midcap space, down 20-30-40%. However, when you invest, you do not invest for three months and six months. If you look at the midcap index and even these midcap stocks which have corrected, look at them on a three-year time horizon. Look at a midcap PMS or midcap mutual fund. You will find that on a two-three year time horizon, they still are giving you very good returns. So it is just what data you choose to look at. If you look at from Jan to June kind of data, yes it is very painful, 20-30% but if you got back and look two years or three years data, you still find that the returns are positive. This is very natural because we had a correction in the market, 10% on Nifty, 20% on midcap, 30% on smallcap. Whatever has run up harder before that, will see a similar deeper correction. The midcap and smallcaps had far outpaced the Nifty and the largecaps. All these stocks look pretty good right now and have fallen less, but seen from 2-3-year levels, they were really not the big runners. The big money was made in the small and midcaps. It is more a case of what has run very hard, has rested longer and deeper. That is the starting data point. If it is January 2018, it looks very bad but if you go back and look at January 2015 or so, it will actually not look so bad. Give me a stock which you think could be the next Apple of India, ten years from now? I wish I knew that. Even Apple shareholders never knew that. The surprises and trends in market are not due to just one singular secular thing. Once can try to find the formula, go back on the spreadsheet and look for it. Honestly, there is nothing. You just live from cycle to cycle. It is a continuous journey. Apple has made it. The other constituents of FAANGs, are also at a breathing distance but they have had some bad weeks prior to that. It is all about trends and it is about multiple cycles in those trends. In our markets, we had very good runs in midcaps and smallcaps. They have rested. Now new trends are emerging. In a bull market, it is not going to be a single linear stock that is going from zero to hundred. There are cycles. At the end of the journey, one stock will stand out. It will be a marquee and we will make it a case study but I really do not think I have the ability to know what it is. For me, it is more important about participating in every trend and hopefully getting it right in each cycle. While we have discussed the Nifty chart, what is your perspective on what are you seeing on the FMCG index from a three-year perspective? Have you picked out this chart over three years to highlight that the going still looks good? This is the most relevant question today. We have had a six-month correction in the market and winners of the next bull market are always found in corrections. When the markets correct, these stocks or sectors correct less and when the markets stabilise, they actually are the first few stocks to break out and run into new highs. My big learning or big observation in the last six months is that the theme which is going to dominate our markets is consumption. FMCG is a part of it, very narrowly but consumption you can look as a broader definition or a boarder canvas. Going ahead in the next few years, the theme is going to be consumption and it is in price performance as well as numbers. Whenever you recommend one of these consumption stocks, FMCG stocks, the normal complaint is that they have run up too much or are too expensive. But I feel the numbers are coming. If you keep waiting saying it is too expensive or it has run up too much, then you will keep on waiting. The market will force you to get in some way that will be near the top. I feel that the big theme that stands out for me in the last six months is the way consumption stocks have performed during the correction and they are going to be leaders. So from the two- or three-year time horizon whether it is FMCG or other consumption stocks – food-related, attire- related and many other themes that can come under the consumption definition -- are going to really dominate the market. The only challenge is the fact is that they have run up too much. They are too expensive. But you will have to bite the bullet and there, money will be made. I see very sweet trends ahead. For me personally, in this correction, the big activity has been to really realign my portfolio and to get overweight consumption.They have held on very well during the fall and that has been good but more importantly, post the fall also they are leaders. With the kind of numbers that are coming, it reinforces my belief so that I think going ahead the way I am positioned is to see consumption as a leading sector for the next two to three years.You understand the importance of a cycle much more than anyone else. All markets go through a cycle, there is a boom phase, there is a bust phase there is a phase of consolidation. Some of these FMCG stocks have been in some kind of an epic bull market for many years now. There would be a time when you would say they will get aged and they will start reversing. Are we nearing that point? FMCG companies earnings are strong and will they continue to go higher?The bull market is just starting. We like to talk about it and look at them in a very short term but for many years before that, they have not really done much. In fact, they have been relative underperformers and most people holding FMCG stocks got frustrated and at some stage dumped it. It is only those who have been patient and who have held on have really participated and it is the start of a bull market in FMCG and a lot of other stocks which come under the consumption theme.Look at the broader canvas and you will find a lot of stocks which are spectacular, at least technically. Even the numbers are surprising on the upside. Limiting it to PE of the market or PE of the sector etc is good for the history books but the market is dynamic It throws out new trends, new price movements and we have to be there to interpret it, to interpret the new developments or the way things are. Look at the Indian markets, look at the whole MSCI Emerging Market Index, look at most global markets which are at lifetime highs and galloping away. If you correlate MSCI Emerging to India, you will find it is a different paradigm, it is a different kettle of fish and that also keeps happening in our market.It is better to throw out the notion about FMCG, consumption stocks being overvalued, having run up too much. You are going to get into it, better get in sooner than later. And I think that this is going to be a very big trend ahead and it is already in progress.

from The Economic Times https://ift.tt/2LN93VD