scorecardresearch
Having a concentrated portfolio is a recipe for disaster: Helios Capital's Samir Arora

Having a concentrated portfolio is a recipe for disaster: Helios Capital's Samir Arora

The three big sectors in India are financial, consumer and technology, Helios Capital's founder Samir Arora said at Business Today's Market Today Summit in Mumbai.

Having a concentrated portfolio is a recipe for disaster: Helios Capital's Samir Arora Having a concentrated portfolio is a recipe for disaster: Helios Capital's Samir Arora

The three big sectors in India are financial, consumer and technology, Helios Capital's founder Samir Arora said at Business Today's Market Today Summit in Mumbai. He also said that in today's times, having a concentrated portfolio is a recipe for disaster.

"Even Warren Buffett's concentration has not worked in the last 25 years. We looked every year at his top 10 holdings and seen their performance v/s his own performance. Less than 2 or 3 of his concentrated stocks even beat the index in that period. The stocks that were not in the top 10 did better," Samir Arora, founder, Helios Capital, said.

He added that choosing concentrated stocks is not a formula it's a lottery. "Nobody will come to you and ask how you chose the lottery number. Lottery is not a strategy," he said.

Typically, Arora likes to go with 30 names which has 10 big ones and 20 medium cap or new names. It starts with only 2 per cent, he said.

Arora is currently not seeing a very bright picture for India's IT companies. "When Satya Nadella says that they're seeing slowdown in customers, then cloud companies, cyber security companies all see slowdown. He says that he doesn't believe the Indian IT companies that there's no slowdown. I don't think I will regret not buying them," he added.

Looking back at the last year, he said that if you look at the big picture of things that affected us, it was the US market, and one was China and its policies. "Both have gone past their negativity in some sense, and both have started to flaten out. And hopefully after the absence of these two negatives for India we will not create any more negatives in the Budget like capital gains etc. So, it's okay. I think the strategy is if we don't have it then we'll call it a good budget," he added.

Every 6-7 years, he said, there's one bad year and that bad year is not just for that year, it takes with it the returns of the previous year and sometimes even the year before that. "So, you get four years of return in a seven-year cycle. Maybe by the end of the year the US rates will be cut which is allows India to cut. Few months will see those high rates which are not increasing anymore but are still quite high. But by the end of the year, you might get 5-7 per cent to have your overall returns higher than 10 per cent for sure," he said.
 
Arora added that China issues were specifically hurting investors and all of that can't be forgotten just because you're now playing a mean reversion. "To get to their rebalance in China, it seems like they're actually taking out money from India because flows right now are positive in China, Taiwan, Korea, all markets except India. That is a bit of a rebalance which I never imagined. If China and US are okay, then our external thing is positive to flat," he said.

He also said that the US market has been negative two years in a row, very rarely in the last 25-27 years, and only once, which was in 2001. "Last year there was an issue of FII selling in the first half something like $28 billion, it had to be for non-India reason because I don't think India did anything specifically bad for us to have a $28 billion outflow. 2018 maybe you could say it was India related and last year. One reason could be US inflation, US interest rates. The US interest rate should have reached the current target. In 2-3 months, that would be over," he added.
 

Also read: Welspun Corp shares rise 4% after subsidiary wins contracts in Saudi Arabia

Also read: Tweaks to capital gains tax unlikely this Budget, 2023 to offer better returns, says market veteran Samir Arora

Published on: Jan 24, 2023, 3:42 PM IST
Posted by: Tarab Zaidi, Jan 24, 2023, 3:21 PM IST