World not buying India's long-term story logic: Samir Arora

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World not buying India's long-term story logic: Samir Arora

Samir Arora of Helios Capital feels the world has become too nitpicky and stock picking has become difficult in such uncertain environment.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other FIIs are saying about the markets See what other experts are saying about markets See what Udayan Mukherjee is saying about the markets Arshiya Intl BSE | NSE 31/05/12 Are Mutual Funds betting on Arshiya Intl? Other Stocks in this news UTV Software Communications | DLF |

Samir Arora of Helios Capital feels the world has turned choosey and stock picking has become difficult in such uncertain environment.

The US economy is now stalling and the odds are that a recession will follow. However, Arora said, the main concern for the global market is the European debt crisis. "We continue to remain cautious," he said adding, "...globally investors remain short in the markets."

For India, Arora said, policy concerns along with global uncertainties remain a drag. He doesn't think the world is interested in buying India's "we are good when it comes to long-term" logic right now.

"For too long we have said to everybody that we are very good over two or three or five year," he said explaining further, "We have to earn it, but even if we say it is true, we have seen that the world has become much more short-term."

Below is the edited transcript of the interview. Also watch the accompanying videos.

Q: You have not been feeling particularly bullish on the market since quite a long time. Has anything change since then?

A: The world is depending too much on small things. For example, in August the entire world waited for Bernanke and Obama to make their respective speeches. As of now, the global scenario looks stable but in India, we are facing issues like growth slowdown, high interest rates, lack of confidence among industrialists, etc. I feel that one of these few factors has to be good for us to say that we are growing.

However, we can neither say that the world is in a positive frame of mind nor we can say that Indian market scenario is encouraging enough and therefore, I am more cautious on India.

Q: What is leading the kind of uncertainty that is there in the market today? Are we priming for a big breakdown or we are going to remain more on sideways, going nowhere?

A: The kind of moves that happen in US market, when it's down 150 points and then up, these cannot be done by normal investors with long term view; these can only be done by people, who are panicking on every twist and turn in the market. It seems that the world is already prepared for a bearish outlook. As far as India is concerned, what we present as a bullish stance is that we are good in the long-term, which is true.

We have seen that the world has become much more shorter-term and if you say that this is good for long-term investors, then I don't think the world is interested in buying that logic because for two long, we have been saying that we will be very good over the next five years but we don't have that kind of money in our market.

Our mutual funds people trade for every 4%, when the market is up they sell and when the market is down, they buy. So, they are happy to make 2% return, which is not really bad. In my previous years, I would have criticised that why are they are playing such a short-term game but that can also be the outlook for long term Indian funds. So, the challenge is, how can we have a super long-term view in such high uncertainty in the shorter period.

Q: Do you think it will take a few quarters to fix this and are we in one of those phases where the market forms a range for multiple quarters and goes nowhere? Is it like only a very few people can pick out a few stocks from there and make money, but at the broad level you do not get anywhere?

A: Unfortunately, it has been happening like that. In fact, it is easy to pick stocks in an environment, where the market is not going anywhere. But to pick stocks in an environment, where the market is falling or even not falling in a sharp sells, but is down 10%, it becomes impossible to find stocks, which may help you gain. In the first six months, the market had 10-20 stocks that went high.

On the global front, the world is now thinking beyond Greece already.  If look at yesterday's event when the Chinese met Italians, how much do you think the Chinese can put in a bond issuance of Italy? It will be about USD 5-10 billion-20 billion; they are going to put USD 100 billion.

Q: Would you not be surprised if the market goes back to breach that 4,300 mark?

A: It looks possible. I am more positioned for a 4300 mark than a 5,500 mark in a relative sense, but anything is possible this time.

Q: How are you positioning yourself now because the only trade, which seems to be working, is to hide in buying more of Hindustan Unilever or some of the consumption stories or even telecom? Is that something that you are doing with your own portfolio too?

A: We have found a few names here and there. One name I can discuss with you is UTV , where the Disney has made an open offer to buy 100% of the company at Rs 1,000. The price is more like Rs 960, so it's not like you are playing from Rs 960 to Rs 1,000. The history of India is such that not a single open offer has ever gone at the initial offer price.

If you look at the day Disney made this offer, which was early August, since then the Indian rupee has depreciated by 7%. So assuming that, even if the Disney had a dollar budget for this acquisition that itself is worth Rs 70 per share, UTV has only agreed to sell at the open offer price discovered in the market.  Therefore, it clearly means that Disney will have to increase the since UTV has not agreed fully with Disney's offer.

According to us, there is no way that this price will not be increased by at least 10-20%, and if it doesn't, then we will get at least Rs 1,000 back. Once the management increases stake in these multinationals and there are some technical issues, even then the stocks do not fall too much because the market factors in further price increase. Hence, there is no need to over analyse all these stocks as they cannot start trading with relaxed positions with institutional investors.

The company that we like very much is Arshiya International , which owns India's first free trade warehouse zone and also the second free trade warehouse zone. This a very strong and completely new business, which India needed since long time.

So, apart from this, we are trying to find new stocks. We have lots more shorts, which can be covered because the volumes are large. Moreover, there are mostly larger names, which are all over the map. I am bearish but that has not stopped the process of selecting stocks on the long side.

Also read: Rupee depreciation to help IT stocks, says Angel Broking