Transcription
Samir Aurora, founder and fund manager at Helios Capital, joins. And Samir, good morning. Hal on this side. You know, an interesting tweet that I read that you put out as well, where you've asked everyone to find any new negatives before Indian markets open up. I don't think anyone could find anything there. But how are you looking at the peace deal now? I know there are, we've been talking about it, a couple of days away from the papers to be signed. 19th is what you're looking at. But initial comments?
No, initial comments are that I believe, I believe for a few days that, I mean, for maybe three, four weeks, that Trump was, President Trump was very keen in getting out of this in some form or the other. And right now, we don't care what that form is, as long as it is over and oil can flow. Uh, so I believe that this will be done. And I was only making fun of people who keep finding new excuses, that you better find some new ones now if you want to be bearish.
Absolutely, Sam. So therefore, uh, there, there are a lot of comments that have come through over the course of, of, uh, the conflict so far, particularly in the last week, where mutual fund investors, SIP investors have been questioned about why have you continued to provide an exit to foreign institutions? That for now, at least, that that goes out of the window, right?
That can go away in two weeks, because all you need is an 8, 10% move. Like it's already 5% in two days from Friday, two, 3% on today, include particularly in dollar. And then every number will change. Because if the market goes up, say 10%, of which five has happened in two days, uh, including the currency strengthening, then your one-year number goes up by 10%, your two-year number goes up by 5%. And that will beat anything else you could have done. Even if you think that the past two-year numbers are sort of in line with the index, uh, with the fixed deposit or something else. So all this shows is that broadly, India, actually, the Indian market did not do very badly last one or two years. Uh, considering that the previous years were good. What made it painful for everybody was that Korea's done very well and Taiwan has done very well. In itself, uh, 3, 4% down, 5% down this year, or whatever it was before today, is not the end of the world. But if you see Korea, 90%, it makes everybody upset. Except that the world also did not have enough in Korea. This year, FI sold $70 billion till Friday in Korea. It is not that people put in new money, quickly took it out of India, put it there and made lots of money. This was all investment that they had done previously. By the way, even last year was negative FI flows into Korea. So nobody's saying that there, because everything is, according to me, all explained in the world by one line, and it is called the halo effect. When a fund manager has done well and now does badly, you will say, no, no, no, he's a deep thinker. He buys only value. He only buys when there's a correction. And if for two years he does badly, they will say he's clueless. Everybody knew what had to be done. The world knew what had to be done. Even Twitter people knew what had to be done. So it's all halo effect. Today, India housing is having a negative halo effect.
Everything is wrong. You make the market go up 10%, and they will say it has bottomed out. You know, India's learned along the way. They did this NRI deal. By the way, on the NRI deal, they better give good rates because so far, what I hear is not great rates. If somebody thinks that on 12% with nine times leverage, anybody will give them any money, nobody will give. They, I'm just telling these bankers, they better give 15%, 18%, then only it works. Yeah.
Because nobody's giving $50 billion. If you give 6% return, it will be because you're leveraging it nine times in a proper return, then only you get this much money. But anyway, so the point is, you can easily turn it whichever way you want. And by the way, for the FIS or in general, anybody, if you make the market go up four, five days in a row or broadly do well over one or two weeks, every line will be reversed. If you say the market is down a lot because everybody, they, every time they sell, now we can say if it happens like that, that files don't know what they are doing, they sold while the market was falling and see now it is up. So you change everything once the market turns. And right now, since it has been negative, every line on India is negative.
Now, sir, the, the entire NDTV network is watching this broadcast right now. So, uh, would love to understand from you, people who are not necessarily daily market watchers but have been investors. They would want to know what should one do from here. Do you, does Samir Aurora think that this is the most positive development since the conflict began? And is that a, therefore, uh, a measure to invest into Indian equities, Aresh?
Yes. So obviously, since the conflict began, this is the most positive news that the conflict is ending. So that one is easy. Yeah.
The issue is, are there other negatives which are still leading to, uh, bad market? Which could be lack of AI and stuff like that? So on those, it's more difficult to say, except that, uh, even in those markets, that is the rest of the world, where the markets are doing well, actually only the AI part of the market is doing well. Rest of the market is plus minus similar to what happened in India. What made India stand out on its, in terms of negative, was also that the currency was weakening. And that sort of made it that, oh, till we see the currency stable, we will not buy even regular equities and stuff like that. And that's what I've been saying since the last one or two weeks, that the attempt to bring in these FCNR deposits and to change terms for raising money otherwise, and ECBs and all, is a clear attempt and looks like a reasonably good sort of features to be able to actually raise, combined with the other things, FCNR plus the other things, theoretically, 60, 70 billion. And you needed something to, uh, sort of stop falling. And therefore, broadly, we think yes, that, uh, India is good. And even as I said, last one or two years were not bad, a, if you did not have currency weakening in addition. And we, if you looked at it over three, four, five years, but the fact that other markets were rocking made us look more depressed, or made us more depressed, including me.
Well, uh, it didn't show, Sam, I must say, neither on Twitter nor on our conversations.
Okay. Now.
I didn't have any gum, but these are the.
Yeah, I can imagine. Would, would banks be able to say that, I mean, are banks the first port of call, really? This whole FCNRB move plus FI stop selling?
From that angle, it is it. And actually, there's a second angle, which is that a large part of that is FI selling. And so if FI selling stops, the only thing why I'm not convinced that FI is immediately buying is that would have worked if we saw that people were selling from India to buy rest of Asia or these emerging markets. And therefore, they may stop that. But when I see that Korea also, they have sold 70 billion this year, and Taiwan also, they have sold some 15 odd billion, and India, they have sold nearly 30 billion. So it doesn't look that, uh, if we do a little well, that because even the countries doing well are having, uh, money outflows for this year, for whatever reason. But the fact that it even slows down or in theory reverses would be a second positive for the banks. Yes. One is this liquidity thing, which itself is the reason why Friday and today the banks are doing well. And will continue to do well also because they are cheap. They have fallen a lot. The issue so far was relentless FI selling. And as you know, all the domestic guys own a lot of banks. So it was clear that the Indian side was willing to buy these banks. So the only obstacle was the FI selling.
So Samir, that's with regards to banks. If you have to look at any other pockets, because there is confusion yet when it comes to AI trade, what's happening with technology, uh, from where?
There is, there is no confusion on AI trade. Once you stop talking about it, those stocks will also do well. The point is that we think that there's no other sector in our country. These stocks have a weight of 6%. Nobody cares for them anymore, but except the TV anchors. There are these new wage companies, there are defense companies, there are capital goods companies, power related companies. But for some reason, because 15 years ago they did well, every morning we talk about them. In US, I see the US, your competitor business channel, the English one, evening one, and they are not talking every day about Cisco and Accenture and Cognism. They are talking about new things. We have new things, and those new things are doing well.
With the new age tech companies. I know you've been positive about all of them as well, in terms of new, not tech, not tech, I agree, the consumption side of it as well.
No, don't even call food delivery and all. I mean, even new ages AMC is new. These are newly listed in last five, six years type of things. These are all the new things which are growing much more than a guidance of 3% or consumer staples growing at 5%. At least the starting point in India should be that you are growing 15% or hope of do growing 15%. And can you pay for it or not pay for it? What is the point of some foreigner coming to India and saying that the growth will be 3% but the and currency more broadly, you will lose 3%. And, uh, why would anybody look at those? So I think you also stop and we move to growth.
You, that's an interesting point, Samir, that you're making. Okay, let's move to growth. If you're moving to growth as well, let's leave aside all your traditional sectors. What is it that you would say at this point in time, with, uh, start, someone who's starting a fresh right now, should put their beds on? We've spoken about banks already. So, so big picture, the point is that Indians on one end curse or criticize that the Indian, uh, old companies or the IT companies or even the old conglomerates did not put any money in loss-making AI models and space companies or whatever they get fascinated with, except that they themselves hate any company that is making a loss after its IPO. And you can see that. I, I'm a lot on social media, so I can see how much fun they make of these guys who made 20 and 30 billion companies. I think all the new age and all is good, but in terms of maybe 20%. But there are other new areas which are not new companies. For example, uh, capital good related companies, China plus one type companies. These might be little smaller. And and the banks are more for steadiness and to give some anchor to the portfolio, that it is not very volatile and stuff like that. And so then even your group, your parent companies, these are all guys who are growing big time, big size, and now have acceptance of the world. So there are so many areas where, uh, growth can be there. And to maybe a few stocks, three stocks, two stocks, 10, 15, 20% can be extreme value, high dividend paying, whatever, 5% some Coal India, some this. But you cannot have a portfolio of total value in India, according to me.
Point, couple of questions. One on earnings, right? With this cont and hopefully it is resolved on the 19th of June, it doesn't go back, right? Assuming that is indeed the case, will some people, and I don't know about you, will you also have to relook at your earnings estimates for FY27 to say that the worst has not taken place? And so that is a positive. And how much is in the price right now, in your opinion?
So the thing is, if you look at it for the March quarter, the results were quite good. If you went beyond the Nifty and went into midcap and, uh, or you looked at 500 or you looked at midcap and small cap separately. So the growth rate for Nifty alone was, I think, 5, 6%. But for 500, because it had 30%, mid and small, it became some 10, 11%. But separately, mid and small companies had, I think, 20% plus growth. So the growth was coming in. And then there is this shock which would have at the top line taken off, uh, 2, 3% if it was there for the whole year. But now that if it is there for six months, let's say, three months already or two months already done for this year, a, it can be interpreted or justified, not interpreted, but justified as one-off, an external shock. It is not an Indian demand issue. It was a, this thing that supply was not there. So this can be, you can move along. And therefore, I would think that this year's earnings growth will be, it was supposed to be 15 in our mind, it became 12ish, without knowing exactly from where it'll be taken away, at least in aggregate. Uh, and now in aggregate, you may make it 13 or something. But as I said, if the other elements improve, and one of those elements is currency, which has improved. Second, that there is broadly in every phase in the last 15, 20 years, if you see how much fii sell of the market, it normally ends at about 1%. It has happened, I think, six or something in 2008, and then once more, and now be 1%. And if you see the continuous run, then in those kind of sort of different inputs coming in, you would broadly think that the market is plus minus somewhere near buying stage or to adding stage. And we know broadly that the alternative, which is debt, gives low returns, and all the tax features are also different. And therefore, it'll move on. That is what it has been. There's nothing new that we are saying that equities will broadly do better than other things. It's, if you count it at the right, at the bottom of a two-year bottom, and say, oh, all the numbers are bad, or they have become bad, obviously, but that is because you know already that the market is down for two years. Every number will look worse than what it would normally.
That's true. That's true. Samir, is there merit in betting, changing the positioning from maybe an overly smid positioning, if people had that, to now having a large cap focus, because banks come into the fray, or not quite?
No, no, no. Because the rest of it is very boring. You see, that's what I'm saying.
Got it. The rest of it is, consumer is very boring.
It is too low for any interest and the valuation. And it is not boring, but it is totally confusing. So it, you can say that it might be cheaper, but on the other hand, you can't even talk about 6% growth. The only thing you can say is that in the past, it happens like this and that. But you may, somebody may be market weight. But how do you say, I believe this? So, and, and some of the other, um, no, I don't like that much the large caps relatively.
Got it. Relative.
Got it. In which case, Samir, and I'm only using the benchmark Helios Mutual Fund Small Cap Fund as a, as a, as a, as a statistic. I saw, I see that the portfolio that you have, one is very well diversified in terms of sectors also. The weightages are also very well spread. You don't have a very large overweight on an individual name or an individual sector. Is that how you approach it now?
That is all my life. We don't want any one stock to define our life. For example, even if you see flexi cap fund, the biggest holding will be some 4 and a half%. It's not that, oh, I found this one stock or the guys found one stock and that will change our life, like it does for some of these concentrated investors. We want the process to work.
Any one, you know, can be wrong also. So in our, even if you see our sort of flexi cap fund, which is, can have anything, even there the weights are not high. And in small cap, we top down made a rule that you can't be more than two and a half% or so in a name. And even maybe 2% is good, uh, because you can get a cohort ride. And this is the kind of things that work. But exactly whose turn it is next depends so much on the execution and what in the end, that choices that the promoter has and his luck, that you can't overdo the precision.
Samir, uh, in light of, of massive developments in, in other parts of the world, I'm talking about SpaceX in a new trillionaire. Uh, the lens or, or the glance from India is of course looking beyond the Indian equity markets. It's been described as boring, it's been described underperformer, etcetera, etcetera. But would you, would you caution investors at this moment, because the currency is actually seemingly moving in the other direction? So if you're investing from India abroad, you might lose out.
No, I don't think currency is strengthening a lot, by the way. I mean, maybe 2, 3%. What I meant was it should stop falling on my head every day.
Yeah, that's true.
But I have not, because in 30 years, I have never seen it strengthen. So I'll be very delighted if it does not fall or does not weaken. Uh, no, US is okay. By the way, we are, you know, we have a fund for that. I, by the way, participated in SpaceX also for a small amount. I got only 15, I mean, our fund got only 15% allocation. But the point is that, no, NASDAQ 100, I always say people can buy anytime because NASDAQ 100 is a group of companies where you're not focusing on one technology, one this thing. You know, they have all kinds of thing from AI related to hardware related. And in 13 days, they will have space related and everything else. And they are generally, uh, cash rich and cash generative and stuff like that. You can have a 10, 15% allocation, sort of, near permanent allocation, I would think.
Samir, uh, so obviously when things like this happen, there are a variety of opinions that are described. And it's been described, SpaceX, the IPO, and everything that happened around it, as the peak of AI exuberance. Do you concur?
Actually, I first thought that I will sell it off on Friday because I got such a small allocation. Finally, I said, let it be, you know, let's see what happens. No, basically, there's exuberance and SpaceX looks highly valued. Okay, Elon Musk, we have a few. It's okay. But generally, I don't think it is the peak yet because there are two more big IPOs. And at least one, if even if OpenAI by the time it comes, people give up. But Anthropic, people will want to see again when it comes. And ultimately, this IPO has gone smoothly because the returns were neither too high for everybody to dump on day one, and either too low or negative. But we'll know in a few days. Right now, I guess people will wait for it to come into the NASDAQ index, which is in 15 days or now 14 days left, maybe. And, uh, but, uh, what I, I don't think this is the peak of US yet. No, it's not.
This is not the peak of US. And I think the projections that Elon has made as well, in terms of the revenue that it'll hit by 2030, that's going to be interesting.
Watch out for. I didn't even look at that before. Those are all big picture.
It's a fairy tale.
Amir.
Just yesterday or no, today, Elon Musk himself is, by the way, he's now the richest guy by such a big margin that the second richest guy, Larry Page, is closer to my net worth than he is. The point is, the point is that somebody today or yesterday put out that how this can be valued at, I think, 50 trillion or something, 40 trillion. And he says something like, interesting reading. He only has retweeted. That's how I got to see it. So you can.
Yeah, but that's what I think everybody is still not wanting to lose the pie of it as well. It's okay. I'll say it's okay. Small point is okay. These are, how will you be cheerful if I say, no, my 30.3%? Oh god, I might lose. And it's okay. It's fun.
Absolutely.
Okay. Such a pleasure talking to you today. Thank you so much for being with us.