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Time to find new sectors which would create alpha; FMCG, telecom to be in demand: Atul Suri

At the moment, Atul Suri feels the bigger story is not that where the index is going and how the index will bottom out.

April 07, 2020 / 03:17 PM IST

The market has been volatile and has been moving in a tight range for a couple of weeks now, following global cues and updates on novel coronavirus, or COVID-19. So far 8,000 has been a crucial level for the market as it has not been broken yet.

But according to Atul Suri, CEO of Marathon Trends Advisory, 7,500 on the Nifty, the low touched on March 23, will be an important level to watch out for. "Hence keep your fingers cross that this level does not get violated because that will bring another round of selling. On the upside, 9,100 will be resistance in the near term," he said in an interview to CNBC-TV18.

"Market will continue to be volatile, while the US market is in very good shape due to proactive news from policymakers."

In March, India was third-worst hit market with 23 percent correction on the Nifty due to coronavirus-led devastation of people's life, economy and companies' earnings.

Virus has taken more than 74,000 lives worldwide with more than 1.34 lakh infected cases. The United States leads the chart with more than 3.6 lakh infected cases, followed by European countries and China.

"The decrease in the number of cases in the US does not end the nightmare we are going through. In fact there are many stages to it, a scientific breakthrough is very important which ultimately intimate the end game and that game will be longer," he said.

At the moment, Atul Suri feels the bigger story is not that where the index is going and how the index will bottom out. "I think we are going to see a sectoral churn, many marquee or leading sectors in the earlier up move or multi-year move are going to get challenged. In case of point will be banks."

Hence the sectoral shift or churn is the place which one has to have a handle on and the market perse it is very difficult to call a bottom, he feels.

In the case of pharma sector, he said the issue was under-ownership or over-ownership.

"When the sector is overowned, there is always a risk of whenever there is disappointment, the unwinding happens. And in case of underowned sector, if the something positive comes up, there is a need to get equalweight. So I think there will be shift in all those funds or portfolios," he explained.

Hence thought process is that the leadership in the market changes, new opportunites will emerge, he said. "For me to take the advantage of pullback or next bulll market whenever it comes, I need to be in those leaders and that is going to be a game changer."

Consumption/FMCG

In case of consumption/FMCG space, they have been amongst the best behaved or even the MNC stocks they have really stood out in the markets, Suri said, adding the problem with them was definitely on valuations front that they were very expensive.

He feels this sector, which may be expensive, will continue to attract as there is a business continuity, there is a certain sense of visibility. "As a defensive sector, it will continue to attract attention as every household continues to consume FMCG foods."

Microfinance or Bajaj Finance kind of stocks

In these kind of stocks, he thinks one has to wait for things to settle because business models are changing fast. "The fact is we don't know whether the lockdown will be extended or will be opened in near term. Till we don't get sense of it, it is very difficult to update that model and put some projections on future earnings."

He feels most of microfinance or related stocks to B2C space, what sort of default will happen or job losses will be important to look at. "Hence the fall may not be justified but it is going to difficult to go out and buy till you don't get clarity."

"One needs to be little more cautious. Of course, these are great companies and they will all reemerge. But overall one should look for stability and emergence of new things or new sectors, I think that is where one could create alpha in the portfolio," he said.

Bank Nifty and Telecom

Banking & financials is the most oversold or beaten down sector, he feels. Bank Nifty lost 34 percent in March itself.

"After such a fall, initial move is always short covering rally. Sharpest upmove is seen in the banking and financials space. Post such speculative upmove, does the buying coming further, and does the leadership remerge would be important to watch out for," he said.

For Bank Nifty, he feels 21,500 would be crucial level to watch out for. "Till that does not get taken out, you will see very fast and sharp spike in upmove led by short covering."

In case of Bharti Airtel and Reliance Industries, they will continue to outperform. "Apart from foods, the second thing is the internet now in every household given the telecom usage of bandwidth and people renewing their packages very fast," he reasoned.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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Moneycontrol News
first published: Apr 7, 2020 03:16 pm

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