'Those sectors that were new in 1990s...': Samir Arora says history is repeating

Samir Arora, in an X post on Friday, said stock markets delivered strong returns in the 1990s, provided investors ignored the old-economy companies of that era and instead invested in emerging sectors such as information technology, media and private banks.

"All those sectors that were new in the 1990s are now 'old', and investors are going through a similar cycle once again," the founder and Group CIO of Helios Capital said.

To illustrate the returns generated during that period, he said Alliance 95 Fund, a balanced fund, delivered returns of 28 per cent per annum, while Alliance Tax Relief 96 returned about 38 per cent per annum between 1996 and 2003.

Arora's post drew several responses. One X user wrote, "Spotting the new sector is the easy part; selling the old one that already made you money is the hard one."

Another user said that information technology, media and private banks were profitable businesses in the 1990s, whereas many new-age companies today are still loss-making.

In an earlier post on June 19, Arora said investors made the elementary mistake of ignoring very high valuations this decade, focusing only on business strength and "writing books on how valuations do not matter and you should hold stocks forever."

The BAAP (Buy At Any Price) strategy, in general, does not work, he said.

"Now investors are making the exact opposite mistake of ignoring business uncertainty and focusing only on valuations. Buying during uncertainty is recommended when uncertainty is market-related without threatening the underlying business, such as interest rates, market flows or politics. Here, the issue is business uncertainty and the threat of disruption, so all uncertainty is not of the same quality," he said.

Samir Arora earlier this year said investors should focus on identifying and avoiding stocks most likely to underperform rather than trying to pick the biggest winners. He described this as an "elimination strategy", a philosophy that underpins his investment approach.

"It is easier to know who the losers are than to know who the winners will be," adding that fund managers often underperform not because they miss high-flying stocks, but because they hold companies that destroy capital. He said such an elimination strategy is a more realistic approach for delivering sustained investment returns, he said a Ferbuary investment podcast with Groww.