Real estate package easy to implement in the short term: Samir Arora of Helios Capital

Edited excerpts from the interview:

The big question then is the new all-time high. What should be the market strategy at this point? Stay with the leaders?

I would think that for the moment, that momentum is working but if you have to take a slightly longer-term bet, the bet must be that this rally will broaden and actually it’s already broadening; if I look at the 5-7 stocks we bought in the last 3-4 months, they are up like 30-40 percent each, some which I told on your channel also once.

So I can see that it is broadening but it has not spread yet. But overall I am still a bit confused as to why it has suddenly gone up yesterday and today – that is a separate question.

What would be the stock-picking strategy now?

As I said what we did over the last few months is buy some of the stocks which may have had some bad recent results or something, but which were not going to totally disappear from the map of investing and all of them seemed to have worked and maybe more have worked but I am only tracking the ones I bought.

I totally do not believe that to be a fund manager, you have to choose between either a strategy given by one fund manager who says buy the highest quality or the second one who says buy totally beaten-up because at a certain instance and time that would make one strategy much better and therefore that fund manager a big hero of that time.

However, overall it’s a continuous game where investors are coming, old investors are already there.

So you cannot say that if today the price is right and tomorrow, if the price is up 20 percent and a new guy comes in, the new investor comes in, basically he is buying the same stock 20 percent higher and it does not matter what the starting point is, what the time is. It is a mix and match and that is what a fund manager can do by buying 30 odd names.

So we have always had this mix and over time the discoveries will be in the stocks that have not done well or that are beaten-up or their beating up was much more.

There are so many examples where the reaction to the news is totally disproportionate and now are allocating 10-15 percent in five names; 2 percent only, but in names where the stock doesn't need to be good or bad but the response to some random irrelevant news is so high.

Can you name stocks or at least sectors?

Last time I indirectly said were the Delhi real estate company and a private sector bank which cannot be driven out of existence; only you may have a market cap of $ 1-1.5 billion and proper private sector banks, not those old banks. So those stocks have all gone 30-40 percent, not a bad deal. There are 3-4 more like that.

Some we may say, enough is enough but the point is now we are analysing two things on new stock. One is the stock and the other is what has brought it down. Sometimes the stock may not be great but what has brought it down is so irrelevant that we can half expect that at least it will retrace 50-60 percent of that fall because the fall is so disproportionate to the news.

I just want to come back to the point about what is happening with this market because as you said if you go out on the street everyone is talking about how this market is climbing a wall of worry but there are so many worries whether it is slowdown, GST, weak global cues, weak GDP, etc, you think there is still more legs for this market to go or do you think now it will catch up with reality?

I think it is not straightforward and going up at this pace may not be fair as of now. However we have a high net because we are betting on the budget but the new news that is coming on the budget is not so exciting because there is no talk on LTCG, DDT may be useful to some but not useful to others but what can they do for telecom? You cannot tell the world that there is price control, you can only give them compensation in some other form -- take two more years, three more years. So, it is not straightforward but as I said the government seems to be keen on doing things and that is helpful and over time the base effect will take over.

The real estate package which came up with reviving these old stuck projects is easy to implement in the short term. I think the government should give up on the deficit number because that is making it do things that are not necessarily optimal.

For example, you want to privatise BPCL, you can get a much higher value if you gave it a little bit more time. If you say no, I must do it by March 31 because I have to show a fiscal deficit number, most probably you will sell it at a suboptimal price. So, they should just give up the fiscal deficit number and treat it like a rolling number rather than a number which you have to get on March 31.

The sector of this year has been telecom - Bharti has been the stock of the year. Do you think this rally has a risk of perhaps completely petering off in 2020 or are you adding any telecom names to your portfolio?

You do the research of 160 countries and tell me in which country a telecom stock has done well over 10 years, any country, whatever be the structure, the whole world is available to you for research that which country the pure telecom stocks have beaten their market in a meaningful manner?

Go for 2-player countries, 3-player countries, go to any country and do any period for the last 10-15 years, it is a capital guzzling machine, it is not so straightforward.

Which sector does well across countries, liquor?

It is very easy. Best is to go and look at the Forbes list around the world and see where are the billionaires? You will see that the billionaires are mostly in technology because they don't have to dilute so much. You become a billionaire or your stock does well - which is the same thing - in two ways. One is your company becomes very big or your company doesn't become super big but you have a large stake in it. You have a large stake in it means that you didn't have to sell much along the way.

So if you look at the big billionaires, they will be in technology, they will be in consumer like the Walmarts and all have so many billionaires. Where have you found a telecom billionaire? Except for absolute monopoly in Mexico.

Since you have been in India for a week, what is the sense you are getting, is the equity cult back because mostly what we are seeing is the hot money driving this market, there has been money coming from FIIs, etc. But what about the domestic fraternity? Do you think DIIs are going to take this market ahead?

I don't know like that directly but my problem is whoever I met is confused that why am I bullish on this market because the corporate is not bullish.

We say, no, look ahead, look beyond, tax cut, long-term capital gain (LTCG) cut - LTCG cut excites us but doesn't excite the corporates. So we hope that there will be some consumption-driven or demand-driven cuts, maybe tax cuts or something. I think all this can be achieved provided the government gives up on this fiscal deficit.

Anyway, two years ago we had a higher fiscal deficit. So we can restart from that level and then say that now that we have done everything and the economy mostly will be on the mend, now we will go down but for one shot, we are taking it back to 3.8. So we are not stuck upon it.

Right now I think they are stuck upon this number which is - there is another fear that if they are stuck upon this number, what will they do in January, February, and March. Will they suddenly freeze any more spending because they will try to hit that number?

A lot of companies are complaining that dues from the government are increasing at a time when it is already difficult to raise money. So your point is taken. It can grind the economy slower. Which waters will you fish in?

I only do the same three sectors which I told you, financials, consumer - broadly defined - and technology. These days they are all working, so we are all enjoying it.