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The biggest trigger to look for any big trend is TINA factor: Atul Suri

As a trend investor, I truly practice that tops and bottoms are for fools and liars.

ET Now|
Nov 18, 2019, 01.40 PM IST
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ETMarkets.com
Atul Suri2-Marathon PMS-1200
Banking stocks had become TINA trade for investment in the last two years. The fact is that this banking space is broadening and that may lead to reallocation, says Atul Suri, CEO & CIO, Marathon Trend – PMS. Excerpts from an interview with Nikunj Dalmia of ETNOW.

What do you think would be the trend in the next three to five years? There could be bad days, bad patches, bad weeks and even a bad quarter. The stock could fall 10, 15, 20, even 30% but you would say the trend investor in me would remain committed and not sleep over this volatility?
Private sector financials. I would say not the NBFC space but you are seeing a very big trend play out in insurance and in AMCs. It has all the makings of a very large trend. Again I am not saying what is going to happen in one month. These can go down in three months; but whenever I have seen very large trend in spaces, I feel a fuse factor has come in. The first and foremost, there should be a newness. These sectors were not listed three-five years ago. It is like there is almost a level of newness to private sector insurance in our lives.

Number two, the method of analysis which should be very few analysts and you should be able to spin a very big story -- the whole Indian demographic story that you hear about.

We need insurance…
We need 25-years story and AMC and savings. Look at the US. You can spin out a very big story. There should be a story to it. First, there should be a newness; second, you should be able to spin a story and third, there should be earnings. Otherwise, it is a bubble.

So is insurance like buying IT in 1998? Is it like buying infrastructure in 2004?
Interesting. Fourth factor, which I think is very important is under ownership. You will find that no institutional investors had these stocks and many have seem to be even underweight.

Very few people have it in their portfolio and having run up, the demand for stocks in this space is very high going ahead. These can be very long term themes. Should they have run up in the short term? In one, two or three months, in case they correct, there may be buying opportunities but I feel that going ahead these could be interesting spaces to be in.

Where does private sector banks fit in? There is no newness in the sector. There is extreme ownership in HDFC Bank and ICICI Bank. There is still a very long highway of earnings. How would you deal with that classic?
It is about earnings. As you rightly pointed out, they consistently compound. They have done well in the last year or two because they have been a bit of risk-off bet. Things have been collapsing all around and this is where you could actually hide.

It is so difficult in the last one to two years to be very brave and go out and try out something new because you got it wrong, you got whacked 50% here at least. That was not happening because the earnings were coming. I personally think that money had flown to these spaces. They will not do badly. The earnings will go and may be the rate of change in prices may moderate but they will still make you money. You can already see that how money is moving into the corporate facing banks now. Money goes going to PSU banks also. The biggest factor I look for in this market, for any big trend is the TINA factor. There was no alternative if you went and tried some fancy NBFC housing finance, then something comes out and you are down 30-40%.

Let me rephrase my next question very carefully. I do not want to get this one wrong. If you bought IT stocks, the TMT stocks in 1995 to 2000, for the next 10 years you did not make money right?
Absolutely.

You are in a single low digit return for IT stocks in this decade. If you owned private banks in 2000-2001, you hit a home run if you had 20% returns for about 15-20 years. Do you think private banks could do what IT has done in this decade, which is give you single digit returns?
I do not know. Nobody knows the answer because the fact is that when trends play out..

No returns or low returns?
They are still giving good returns my only contention in my earlier answer was that they had become a TINA trade for investment in the last two years. The fact is that this banking space is broadening and that may lead to reallocation.

It does not mean that these stocks will not do well but the rate of change of price may come down a wee bit. Again, I am not putting any red signs for it but they continue to do well, you continue to hold and they continue to compound and one big mistake we make is always trying to predict how far these trends can go. The markets can really surprise you on the upside and you have to go and see history. As a trend investor, I truly practice that tops and bottoms are for fools and liars…

You cannot predict them…
You cannot predict them and I have seen that repeatedly it may sound cute. We may have a great discussion and I may sound intellectual or I may sound like a fool talking about private sector banks and trends but hey! you know what? The market is that.

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