172@29@17@240!~!172@29@0@53!~!|news|business|companies|-1323803.html!~!news|moneycontrol|com!~!|controller|infinite_scroll_article.php!~!is_mobile=false
Moneycontrol
Watch experts decode 'The rise of ESG investing' on October 29 at 4pm. Register Now!
Last Updated : Jan 04, 2011 05:29 PM IST | Source: Reuters

Helios favours HDFC, says telcos to underperform: FUND VIEW

Singapore-based Indian equity fund Helios Strategic is betting on lenders such as HDFC Bank, despite a strong run-up last year, though it continues to hold short positions on Indian telcos as it believes the industry's woes are far from over.

 
 
live
  • bselive
  • nselive
Volume
Todays L/H
More

Singapore-based Indian equity fund Helios Strategic is betting on lenders such as HDFC Bank, despite a strong run-up last year, though it continues to hold short positions on Indian telcos as it believes the industry's woes are far from over.


Helios, headed by high-profile Indian fund manager Samir Arora, is making a comeback after a disastrous 2008 when it lost about 66% and saw investors pull out of the fund, which once had about USD 1 bn in assets.


The fund returned 16% in the 11 months to end-November 2010 after gaining 67% net of fees in 2009, according to Lipper Tass, beating the Eurekahedge Asia hedge fund index and CSFB/Tremont emerging markets subindex over the same period.


For 2011, Helios sees continued growth in the financial sector as India's middle class expands and private sector players gain market share as one of its main investment themes.


"The big picture is the under-penetration of financial services," Arora, who now lives in Singapore, told Reuters in an interview on Monday.


"Even today the private sector financial institutions have about 30%-odd market share in India, and every year they collectively increase their market share at the expense of the state-owned banks," he added.


"People dislike HDFC on valuations but there are no other reasons," he said, when asked if it was time to take profit after the stock climbed 38 percent last year.


Besides HDFC Bank, Helios' other holdings include IndusInd Bank as well as outsourcing giants Infosys and Tata Consultancy Services.


According to Arora, the initial optimism that greeted the current Congress government has waned due to its failure to speed up reforms. The situation in India has reverted to one where investors should focus on firms that are less dependent on regulations.


For instance, it is still unclear if or when the government will lift controls on diesel prices.


In line with this assessment, the Helios fund's short positions were in telcos and firms whose fortunes are dependent on favourable government policies such as those in the oil and gas sectors, he said.



TV Pundit


Arora, who appears frequently on Indian television and writes regularly for business newspapers, was one of the pioneers in India's mutual fund industry.


From 1998 to 2003 when he was with Alliance Capital, the gold medal winner from Indian Institute of Management in Calcutta and Wharton alumni received numerous awards for his India-focused funds.


Arora declined to reveal the current size of his fund but acknowledged Helios suffered outflows as a result of its 2008 performance.


On his short positions, Arora said India's mobile phone market was over-competitive with too many players. Of these, "only one firm, Bharti, has made money for investors," he said.


A recent scandal involving the award of telecom licenses at well-below market prices -- depriving the government of billions of dollars -- will hurt the industry in the form of tougher regulations, he added.

"The government is on the backfoot... The government will not give any SOPs (reliefs). Everything has to be done at market prices and when you do everything at market prices, the story is much less attractive," he said.

First Published on Jan 4, 2011 03:27 pm
Sections