I'm buying shares of firms posting good results: Samir Arora of Helios Capital

Prime Minister Narendra Modi made history with his landslide victory in Lok Sabha elections. On the occasion, Samir Arora, founder & fund manager, Helios Capital, spoke to Anil Singhvi on how NDA’s victory is important for the stock market. Excerpts:

Were you surprised to see the election results?

I was surprised to see the results because I was expecting that BJP will be able to garner 220-240 seats. But I feel that the market would have been happy even if the government was formed with 285 seats only as I don't understand the kind of impact these extra seats can have on the market. I was positive about the government formation but never thought that it will come to power with such a huge majority and it was not a need.

Do you think the Indian markets will be bullish for the next five years?

There are several ifs and buts because this government has a policy where a person involved in corruption or black money will be punished. It is required to clean India. But what happens that these companies turn up to be someone who belongs to our portfolio or of the market from midcap to largecap companies. So the arrest of an auditor or the CEO of any of these companies will lead to a fall in the stock prices of 50 companies related to the group. Catching a corruption act will have a positive impact in the end, but it trespasses through several accidents while travelling from A to B. Several companies come under focus for a right as well as wrong reasons. Thus, it is not an easy task.

Have you rebalanced your portfolio and increased net-long post-Lok Sabha elections were declared?

I have increased my net for two reasons and they are exit polls and good results of the companies. I increased my net on the day when exit polls were published on Monday. Secondly, I am purchasing shares of the companies who are posting good results and there are hopes that they will keep performing. I am not investing in companies who will be bailed out or there will be an interest cut or their assets can be sold. Today, I ask to buy shares that can provide a confirmed earning growth, and, in the process, I took shares of India's largest state-owned bank as it has posted good results. It appreciated about 2-3% on the day of result. Similarly, I went for a private bank that posted good results.

Are you reviewing investment in the NBFC sector?

I haven't changed anything and am staying with the old NBFCs, including HDFC Finance and two others, which I kept after the cleaning process in September-October 2018. But I will neither buy something new nor sell any of those. I don't feel that the government can change anything as it is not an easy task because you will have to analyse the two sides, that is whether the government wants to save somebody or punish somebody for doing bad things. Incidentally, this government hasn't had a practice of helping before punishing him. So the problems will continue to be in existence, but occasionally a situation can be created where the government offers certain help to a sector, a short-term help, and thus if you want, you can buy one or two stocks but remaining 90% of your portfolio will remain normal, and I am talking about the same.

What are the risk factors for the market?

I don't think that any risk can emerge from the Indian side in this short term of a month as long as the government doesn't make or announce policy/policies or a package. And, we can't evaluate anything that it can be evaluated positively. But problems may emerge after announcements are made, especially if it misses something like steps to improve NBFCs, tax cut or something else. So any global issue can only act as a risk factor at present.

Do you think one can make money via debt and real estate?

Never thought about debt and that's why can't say anything on it. And, I don't think that someone can make money in property, at present. Selling the old properties are going to be a highlight of their life. In addition, in a big picture, if you think that corruption levels can be brought down in India, which means that corruption is committed through cash. Thus, whatsoever the value or price of anything that is bought in cash will go down. By definition, an increase in the property where cash is used will be inconsistent in nature. I don't think that property prices will skyrocket. Those who are talking about property stocks have an assumption that lower price property that will be developed will be sold out.

Do you think that rate cut can be announced when the next policy will be announced on June 6?

Yes, an interest rate cut of a quarter per cent can be announced because inflation is under control, the economy has slowed down, and the new government has been chosen.

What is your take on the result season?

When it comes to the slowdown in consumption then there is a slowdown in several sectors, but I am not taking a negative stance on any sector except auto sector because that is a big story in India. The story is that the young population is present in India and they are getting jobs and urbanisation is taking place among others. So if you are leaving behind the consumption story, then you will have to leave the story of India. In case of the auto sector, the slowdown is quite severe, but you can add logic to it that presence of car services like Ola and Uber have reduced car sales, car ownership has turned up to be less attractive and young people do not feel that they need a car. There is an article related to the US that says that about 55% of teenagers possess a driving licence in the country today, however, this number used to stand 85-90% in the 1980s and 1990s. It is a result of lack of interest. In the case of India, the slowdown is too high and how it will recover? And will the government help or not? So, leaving apart that, we have kept all stories of consumption with us.