market strategies: Trump’s rhetoric isn’t driving long-term market trends: Atul Suri

So, let us first just I will put the template, that is Atul Suri’s template. You get the credit if you get it right. Atul Suri’s template is, it is too late to sell. The bull market is not over. The panic and the excesses in the market, I think the time to panic is over and the excesses in the market have normalised. Small and midcap stocks, not everything will go up, but the party is not over. Now, there is one number which everybody is now suddenly started tracking, dollar index. The fascination with dollar index. Every morning we come and say the dollar index upar hai, markets will go down. Is it as simple as one data point which will decide which way flows would move? Dollar goes up, FIIs sell. Dollars come down, FIIs will come back. It cannot be that simple.
Atul Suri: It cannot be. Obviously, it is not that simple. See, there is a lot into going it also. You go to ask yourself, why is the dollar going up? Why I want it? It is not. It is not like you run a computer system that you create an inverse relationship between the dollar and Nifty and you trade that. Aaisa nahi hai. It is not as that simple. But I guess it gives you a larger thing. It does not match day to day. But even if you look at the US, if you look at US, there is so much happening. I mean, like now Trump is saying, I want to take over Gaza. He came, I mean, pre-election. So, what happened was, if you look at even the dollar bottoming out or bond yields going up, it is very linked to the Trump election. And all his sabre rattling which was there, but actually you look at implementation. Kuch nahi hai. Kuch nahi hai. I mean, Mexico, Canada, he bad-mouthed them to hell.

India toh hai hi nahi.
Atul Suri: India toh achi baat hai. Abhi tak toh nahi hai. So, the fact is that, he said like, as if on day one he is going to come and put like tariffs. He put tariffs, but a phone call or two was good enough for him to reverse. So, if you look at it, he is very smart, a businessman.

He is a businessman first, politician next.
Atul Suri: Yes, it is all about the deal. It is all about sabre rattling. And that man also looks at S&P 500 every day. He is very-very sensitive to markets. So, I feel that the market also has realised, that is why if you see why the dollar or why bond yields will go down, there was a fear that all his moves were very inflatory. All these things will lead to inflation. That is why all things pre-emptively went up. The dollar went up. Bond yields went up. Now when people are seeing implementation, they are saying, ki boss, this guy is talking. He is not implementing.

A 10% move in the dollar in three to four months is a lot, is a lot globally. I feel that those excess will come. I am not saying it will go back to 100.

Jim O’Neill came on one of our shows and I said, what do you think Donald Trump will do? His reaction was, do you think Donald Trump knows what he will do? He says, so do not judge the financial market with what he is saying, go by what he is doing. And that is what I think is important.
Atul Suri: And he has got a system. He has got a team. He cannot just implement. He just cannot go and take over Gaza. It is like mind boggling logistics. He has a team. It has to be implemented. And at that stage, things are very different from what he is saying.
So, template one, we have understood the market setup. Template two, the global setup. I have a follow up question, which is that right now we are feeling great about equities. If the dollar comes down, US markets will also come down because dollar index has gone up and US markets have gone up. It is not going to happen in isolation. So, in a scenario when the dollar comes down, which is good for us and US equities come down, for correction, they have also bloated right now with all standards.
Atul Suri: Who knows?

Let us say, dollar comes down and US equities they come down, what happens to India? Will we outperform in this fall because we have not… So, will India do well when US markets fall?
Atul Suri: See, I do not think that it will be that simplistic. See, what I feel is that we see that FIIs selling in India. It is not just India. It is actually EMs as a space. Three months ago, China was the ultimate trade in town.

Diwali kharab ho gaye the sabki.
Atul Suri: It hit a circuit up and everyone wanted to invest in a China fund.

Yes, I remember somebody came.
Atul Suri: It was a horrible trade. You look at Chinese markets after that. After that gap up, whoever incrementally went and bought, Chinese markets are lower. In fact, China is seeing net outflows. So, what I am saying is that this outflow is not India specific. It is not that they do not see the big story. The fact is that there are now a lot of macro traders who are trading across asset classes. If they have a position in currency, it is linked to equity. If it is linked to equity, it is linked to EMs. If it is linked to EM, India is a part of that basket. So, this is really happening globally in EMs. And as I think that once interest rates and dollar cool off, that pressure on Ems.

It is that tall poppy culture, which is the tallest poppy in the EMs. It was India. Where were they making money across the board? It was India.

So, for our viewers, there are two things to look at and I am simplifying it for them. If the dollar index goes down and US 10-year paper, just every morning look at US 10-year paper, it was closer to five, it is now closer to four-and-a-half. If dollar index goes down and if 10-year paper comes down, that is good news for India and nothing beyond that. Just monitor that and Atul feels that those markers are moving towards India. Now, let us talk about India. You are a trend follower. You always say trend is my friend. So, let us start looking at the pockets. A year ago, everything was going up in the PSU space. Now, the average fall in PSUs is 25% to 40%. For a trend follower, who still believes the long-term bull market is on, is the PSU party over? The Cinderellas of the world, they need to run now, or PSUs will come back and make a new high, whether they make it this year, next year, we do not know but can they make new highs?
Atul Suri: I think the PSU space is in a bit of pain. I can definitely tell you that. There are two or three stocks, I mean, I have one, I would not name it, but who have actually held out very well.

You only own one PSU stock.
Atul Suri: I only own one PSU stock.

I thought you had a few more.
Atul Suri: I had a few more. But then again, as the trend changes, you exit. You have to, you have to recycle and you have to change because what happens is, the interesting observation is also that the length of trends has become shorter. The markets have become faster. The time we started, when stocks had trends in place, they would last three to five years. If you see Bajaj Finances, Eicher Motors, the Page Industries, the 5-year trend, all those terms were there and a lot of the funds did well who were in that mode. But you will notice that in the last, I would say year or two, especially post COVID, the speed of trends has become so much faster. Churn is higher.

Churn is higher. Action is higher.
Atul Suri: Yes, in fact, there has been a paradigm shift in the fund management industry. Earlier, churn was a very big factor and people always wanted low churn. But today you will realise that performance is highest among the high churn funds. And suddenly the sensitivity or the importance of low churn is actually reducing and people are very-very agnostic to your churn. They said, forget your churn, you give me returns.

Because dynamism is changing.
Atul Suri: Yes, the speed, it is a very-very big thing.

So, PSUs.
Atul Suri: So, PSUs really were something that which had a beautiful two, two-and-a-half-year run. I feel that a lot of them have been structurally hurt. They are going to take a lot of time. Let us say railway stocks for that matter.

Railway, defence, shipping.
Atul Suri: Yes, exactly. In defence, one or two stocks still holding out, that is what I meant. I have one of them. But you will realise that in the energy space, in the railway space, these stocks have fallen 30-40%.

When you say energy, power?
Atul Suri: Power related plays.

PFC, REC types?
Atul Suri: All those kind of plays that are there, I feel that they will take time.

So, if somebody is owning PSU stock, just take a hit and get out?
Atul Suri: If you bought at the top, yes, you will have better opportunities somewhere else, that is all I am saying. If you sit through it, but you will have to sit through a lot of pain and underperformance. Now, the thing is that if you bought it earlier, you are in the money, if you can still take something off the table, what I feel that the pullback that is coming, as I said, that markets correct. In the churn, you will always find new sectors and themes emerging, which is something which we can cover later. What I am spotting, how the fall is happening, what is showing strength. Even in this market, there are stocks touching 52-week highs.

So, let us talk about them.
Atul Suri: So, you will find that sectors, the large sector, where I feel that which has held out very well is tech.

Traditional good old IT.
Atul Suri: Good old IT. And you will find that tech is obviously very dependent on the US, because that is the final customer and you will realise that a lot of these tech stocks have actually held the fall as a large sector. Tech is important because after banking, it is the highest weightage. So, if you ask me as a big sectorial space, I think tech has held out very well.

4-5 naam jo hai. TCS, Infosys, Wipro, same.
Atul Suri: Yes. Then, another sector which I feel is emerging very well is autos and more so after the budget that people feel that consumption will come up, especially in the two-wheeler space. I find some of the auto stocks came out with good numbers and some of these auto as a sector has also kind of held on very well, that is another theme.

Two-wheelers, four-wheelers, EVs.
Atul Suri: Absolutely.

What do you like with the autos?
Atul Suri: I prefer the two-wheelers.

All three?
Atul Suri: I have some in my portfolio. The third space that I find very interesting is pharma and healthcare. Again, another theme, pharma to some extent is again export dependent but I find that some of the pharma stocks have held on very well. They have all hurt but the fact is, what has hurt less and in the last few days, what has started emerging, where the numbers are coming out good, when the new bull market or when a fresh trend comes, where the numbers have been good which have reported good numbers, which have shown less downside risk, which are breaking out fast, tend to be leaders.

So, I am getting a sense that it is IT, pharma, or auto, yeh defensives hai. I mean, that means if markets are saying that go for defensives, go for companies which are less volatile, companies which have no debt, high cash, give a lot of dividend, that means markets are moving into a defensive mode.
Atul Suri: Also, I feel that these were under-owned. Like, we know we are talking about capital goods. Am I bearish? I am not. I still think that it is a great theme. After a few months of pain, it will emerge, that is the core Indian theme, that is the mega theme that is playing out. But the fact is that a portfolio which has gone to 70-30 between industrials and consumption, post the correction and post the budget, what will happen is that these portfolios are getting realigned.