Hedge fund manager Samir Arora has an extremely bullish outlook on largecap financial stocks as he expects them to catch-up with their strong business performance on the back of the returning of FII money in the new year.
"We are betting that largecap financials will perform in a big way because the sector is otherwise doing well but those stocks have not gone up in a significant manner," Arora, founder of Helios Capital, said in an interaction with CNBC-TV18.
The financial sector stocks’ highest weightage in Nifty 50 also positions them favourably for foreign institutional investor (FII) investments. Whenever FIIs decide to pour money into the Indian market, they will still need to invest substantial money into the financial sector despite the scope of the allocations, Arora said.
He remains confident that FII flows will make a strong comeback in India in 2024. If FIIs turn more disappointed from China, their allocations to India can also rise, which will be a major positive for domestic equities.
Other major sectors that have a high weightage in Nifty are IT and consumer goods.
Arora said the IT sector is unlikely to find favour with FIIs in the backdrop of the macro headwinds and global slowdown plaguing the sector. "Consumer goods, on the other hand, look a bit more expensive to investors who are coming in fresh now and hence FIIs would rather go to financials or companies like Reliance," he added.
Within the financial space, Arora expects heavyweight HDFC Bank to outperform in the next 12-18 months. The stock has been an underperformer, gaining just over a percent this year, so far, sharply lagging the near 9 percent jump in the Nifty Bank index.
HDFC Bank also remains Arora's all-time favourite. He says it higher than any other banking stock. He also feels that there can't be many banking stocks that trade at a premium to HDFC Bank due to its longstanding history and strong performance.
HDFC Bank is also the biggest holding across all funds of Helios Capital, taking up an 8.9 percent weightage of its total assets under management.
The Samir Arora-founded fund house recently released its first monthly factsheet, which shows HDFC Bank, ICICI Bank and State Bank of India as its top three picks. The three banks make 18.8 percent of the company's total assets under management (AUM).
Also Read | Samir Arora's hot picks: HDFC Bank, Zomato, KPIT Tech, MCX and what more?
At 2.20 pm, HDFC Bank was trading at Rs 1,648.05, up 1.08 percent from the previous day, ICICI Bank was at Rs 1,005.85, up 0.69 percent, and SBI was quoting at Rs 608.50, down 0.52 percent from the previous close.
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