Samir Arora, Founder and Chief Executive Officer at Helios Capital, sees scope for a further 10 percent correction in the market and expects the domestic market to bottom out when the US markets do the same.
In a chat with Moneycontrol, the veteran asset manager dismissed concerns that the current drawdown in the equity market is similar to the 2008 global financial crisis.
Domestic benchmark equity indices have twice fallen nearly 15 percent since hitting their record highs in October 2021, with the Nifty smallcap 100 and Nifty midcap 100 indices entering a technical bear market.
The sell-off over the past six months has been led by foreign portfolio investors, who have withdrawn more than Rs 2 lakh crore from local stocks over the past seven months as interest rates have gone up in the US and the Russia-Ukraine crisis continues to worsen.
“It’s going to be a normal bear market but the trend of Indian public being a counter-force is unlikely to break (anytime soon),” Arora told Moneycontrol.
He expects the US equity market, which has led the downturn in global stocks, to settle down in the next three months, as it would have a clearer picture of the quantum of interest rate hikes by the Federal Reserve and its impact on economic growth.
In terms of portfolio strategy, Arora said that his firm “plays the odd” and the “odd is against high valuation” companies in the market. “We’ve sold high price-to-earnings (PE) IT companies,” Arora said.
The asset manager has shorted commodity-consuming companies in December in anticipation of compression in their margins due to higher commodity prices. Surprisingly, despite Arora’s optimism for domestic investors continuing to plough savings into the equity market, he cut exposure to market-oriented financial services and asset management companies.
Arora said his fund has been buying quick-service restaurant companies, hotels and Amber Enterprises recently in a nod to likely recovery in the contact-intensive segment of the economy, as the threat of the COVID-19 pandemic abates.
Arora said that state-owned companies outperforming their “labels” were also on his buying list in the current market.
“Buy the dip when you know business will be okay over three years. Companies have a sweet spot of three-four years for outperformance,” Arora added.
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