‘Stock picking has become more interesting’

‘There will be massive differences in sectors and stocks over the next few years.’

Singapore-based Samir Arora, bottom, founder and fund manager, Helios Capital, in an interview with Puneet Wadhwa, shares his views on the pace of recovery in the markets since the March 2020 low and his sector preferences amid the coronavirus pandemic.

Momentum investing, he says, is strictly for technical traders, and perhaps, retail investors, who cannot control themselves.

What are the next set of triggers for the markets?

Pace of recovery in markets worldwide has been unprecedented and no one could have anticipated the extent.

It has generally been said that investors should not time markets and stay invested, but still this rally has been absolutely staggering.

Next few triggers have to be related to opening up the economy and the strength of the underlying recovery.

We also need to see that there is no strong second wave, and somewhere in the horizon, there is an effective vaccine.

How concerned are you with the rally in the absence of corporate earnings?

We are not too concerned about the current year’s earnings, as problems affecting various sectors/companies are well known.

There may be some differences with the market on prospects for many companies in the medium term.

This is either due to a difference in view on the shape of the economic recovery or its pace, or the potential for temporary or permanent disruption in a few sectors.

Has stock picking become more difficult in this backdrop?

Stock picking has become more interesting in these times.

There will be massive differences in sectors and stocks over the next few years.

How long before the reality of economic contraction catches up with the markets?

All investors need a model — whether formal/informal or a mental model — to reconcile with what is happening in the macroeconomic background and to the equity markets.

It is not enough to say that we are bottom-up investors and do not care what is happening to the macro economy in which these companies operate.

One way to look at our and world economy is to look at it as a K-shaped recovery, where some sectors are moving up and some others are on the way down and both exist in parallel.

COVID-19 has accentuated trends that were happening slowly even before the pandemic.

Anticipating these trends and seeing how far they can go is very crucial to understanding the current times.

How are foreign investors looking at India now as an investment destination?

India is clearly attracting good inflows from foreign investors.

Even at the peak of redemption outflows, India’s share was much lower than the redemptions from peer emerging markets.

What should investors chase now when they scout for investment-worthy opportunities — value, growth or momentum?

To each his own.

However, we normally prefer growth businesses if we can justify valuations at some level.

Momentum investing is strictly for technical traders, and perhaps, retail investors, who cannot control themselves.

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