Navigating Market Trends And Investment Strategies with Samir Arora
This episode offers a wealth of insights on India's investment landscape and more
In this episode of our year end Special Editions, financial journalist Govindraj Ethiraj interviews Samir Arora, a veteran fund manager and the founder of Helios Capital, delving into his perspectives on mutual fund trends, market cycles, and investment strategies. Arora highlights the remarkable rise of direct mutual fund investments, with over 40% of their flows bypassing traditional distributors, and shares his insights on the dynamics of Indian retail investors. He also shares candid opinions on the consumer durables sector, identifying its cyclical nature and susceptibility to macroeconomic shifts. He argues that while the industry offers growth opportunities, its volatility and dependency on discretionary spending demand cautious optimism from investors. This episode offers a wealth of insights on India's investment landscape and more.
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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INTERVIEW TRANSCRIPT
Govindraj Ethiraj: Sameer, thank you so much for joining me. So before we jump in and we look at both what happened in 24 and more importantly, what you are seeing in 2025 as investing trends, let me start by asking you about what was the most, in your estimation, the most exciting buy call and most exciting or rewarding or satisfying sell call in the last year?
Samir Arora: So for us, we had two good calls which made a lot of money. One was Zomato. And the second one was not panicking on Paytm when it fell a lot and believing that some of those things were unfair and unreasonable and adding more and then making like two, three times from the bottom.
But overall, so these were two ego satisfying and NAV satisfying trades. But we also shot. So our big shot, we are still continuing after nearly a year, the auto guy in India, the big auto guy, name I don't give for the shots like I give for the long, on the basis that the auto industry is basically screwed.
So basically, the investments required in this EV game are too high. And you can see even today's news about Honda and Nissan and all, but you can see all the other global majors all cannot handle the capex required for transitioning to EV, the investments required. And for the Indian guys to do it at their small scale is just because they are protected a little bit.
Govindraj Ethiraj: And you're saying that you're saying that Indian consumers want electric, Indian automakers are not able to ramp up and therefore losing the potential?
Samir Arora: No, no, no. The thing is that the consumer wants me because consumer is being led to believe that he wants. But the companies have to make big investments to transition to the new requirement of the world, which is that you need to have EV cars.
But when you transition from your normal car to EV car, nobody's saying that the number of cars sold will be more once you make it into EV. So basically, you're spending these billions of dollars for basically the same size of the market other than the normal growth of the market, which was there, you know, like whatever, say 5 percent. So you are making this investment basically to remain in place.
But the second thing that has happened is that there were companies who were not making IC cars, who when the transition happened, suddenly said, we are also interested in making EV cars. So the number of players in the industry have gone up, but the size is the same as before, other than the normal growth. And everybody has to invest.
But the new guys investing have different horizons, they are maybe private equity funded, they are unlisted, they can say, I'm taking a five year view, I've just started. Whereas the listed guy who had, who has to show his performance every quarter or whatever, has also to simultaneously invest a lot. It's a basically a capital destroying business, according to me, not driven by economics, but by society or climate or whatever.
So obviously, it is like an external thing. You say, OK, do this before you can sell. So it's economically a bad business, but it is required by them.
Govindraj Ethiraj: Right. So and that's a point let me pick up on. So this was, let's say, almost a sectoral tectonic shift, driven by, as you said, external factors, including changing perceptions about climate, you know, or requirements of society wanting it or governments wanting it or whatever, but not your own driven thing.
Right. And what else do you see happening? I mean, what else is on the cusp of that kind of change among sectors and businesses that you...
Samir Arora: For example, even our good old, which also we are short, there's only one company, so I didn't want to, which is the Multiplex, it went disrupted. Now, there's no point in saying that Pushpa will be a big hit or not a big hit. By the way, this is the reason given for people to buy this stock, that this month there is advanced booking, not realising that the sector has been disrupted out of shape.
And so when we were discussing this with the sell side guy, he was saying, oh, but you know, Indians have to go to theatre, I mean to movie theatre, because what other entertainment they have and stuff like that. The point is that normally a movie going audience growth is population related, let's say 2% per annum, because whoever wants to see can see and maybe there is some growth. So if for this disruption, only 5% people say we are not seeing as many movies.
That's like two years of growth gone. And actually it's much more than that. It's much more than that, I think.
And it's a worldwide thing. So there are like these small, small things you will find all the time. We are talking about our short side of our portfolio, but most of the money is made on the long side.
This is, as we call it, ego boosting shots.
Govindraj Ethiraj: Yeah, no, I'll come to the long side in a moment. But if I were to look at these two trends, I mean, are you seeing anything similar or overlapping, at least in terms of what you can take away? One, let's say caused by climate, society and all that.
Second, caused by the way we consume content, which is also in a way societal, but driven by, let's say, technology, streaming and all of that. Is there anything common that you see?
Samir Arora: Yeah, there's even more. That's why there are many more things being disrupted. I mean, actually, if you look at it, everything has got disrupted.
In the West, cornflakes, which initially people would have thought that breakfast, you will always have the same, you know, how that is basic food. Then they say, oh, there's sugar. So sorry, that got disrupted by healthier foods.
In India, the story is that these consumer companies are getting disrupted because private equity and maybe whatever rich promoters on their own or their children are making sub-brands for small, small things. Somebody's making for, you know, personal products or consumer products or cosmetics. Somebody's making potato chips, whatever they are doing.
Basically, you are making small, small niche competitors to all these big companies who are previously supposed to be, you know, making these. So that's why this has become a tough game, because basically anything can be disrupted. Literally anything can be disrupted now, quite a few things can be disrupted.
Govindraj Ethiraj: And in this case, you're saying the disruption is coming from the ability to produce, let's say, cornflakes or some other consumer facing products.
Samir Arora: No, cornflakes got disrupted because of health, because people suddenly start, it didn't get disrupted. I'm just using the word. What I mean is something which was longstanding to be always, you know, basic food.
How will Americans will keep eating? It got disrupted means that suddenly the one feature came up and that feature became important that it is sugar or too much sugar and this and that and suddenly a healthier alternative. In some sense, Subway came, I think, as a thing to McDonald's that, OK, you'll get fresh food or whatever.
In cosmetics and all, you are basically disrupting because you are segmenting the market so much that you are saying, I can do it for this audience and this audience which wants this and that. And the big guys are not able to react with the same agility.
Govindraj Ethiraj: Let me, if I were to, I mean, maybe ask you to put your MBA hat on for a moment. So you have disruptors who are coming in. So let's say in personal care of foods.
And we're seeing that flowing through Amazon or Flipkart and so on. But do you see their unit economics sustaining? Of course, they may cause damage to the levers and the Nestle's in the short to medium term.
But do you see those unit economics sustaining beyond a point?
Samir Arora: So I read a book, I read a book, I get the name, but I tweeted on it about two, three months ago, basically saying that it is easier to say with new technology, in this case, it will not be technology, but whatever, that's who the losers are rather than who the winners are. So, for example, when in that book, it was that when you have these in the older days, transportation being done by the riverways and all that, and then the railways came, you didn't know which railway guy will do well because they all were running with different tracks from Chicago to New York and somebody from here to there. But you knew that collectively they are going to destroy the existing guys.
So for us, the good thing is we are not private equity guys. We don't care because when they go public, that time you have to analyse them, then are you making profit or not? Right now, we know that we have to remember that when we are looking at our listed companies, because normally what happens is you compare listed companies with other easily available companies, listed companies data that in every sector.
So we tell our analysts, please, at least check from contacts with private equity funded below the radar, companies are being formed and who knows, like it happened even with batteries. Listed, there are two companies, Amaraja and this other one, Calcutta one. But then there's so many other guys trying new technologies, this, that, that you have to remember to worry about disruption these days.
Previously, it was, OK, it was not this company, it was that company, which are all listed. It was just an easier comparison.
Govindraj Ethiraj: That's interesting. So when you, in your holdings, and I know you have an elimination framework, as you call it, you know, in your current large holdings, are you, from a research point of view, looking to see what could be disrupted, as in, as an actively looking to see, OK, I have a very large holding, let's say in a Levers or Nestle, just as examples. And I, as a research person or a fund manager, I'm constantly looking to see what could really happen.
Samir Arora: So basically, that is one of our eight factors of elimination. So the difference is not that we know it is getting disrupted and the other guy doesn't know who's buying it. The difference is that he will say it is getting disrupted, but it will take three years.
And currently Pushpa is about to be released in the theatre and their advance bookings are very good. And we say no. In those eight factors that we have, of which one is disruption, there is no trade off.
That means we also believe that because the new unlisted guys are competing, let's say in two wheeler, the market has got divided because new guys have come in like Ola has come in, Ather has come in. Now, whatever they sell, ultimately it's from the same universe where the older guys could have sold. But somebody will say the rain is very good for the rural economy.
Next three months will be very good. Therefore, three months scooter sales will be very good. It's not that when we say something is just getting disrupted, the guy who's bullish on those stocks will say, no, it's not getting disrupted.
No, he will also agree. But he will say the window is different. He says no trade off.
Govindraj Ethiraj: So, you know, one point that you've said consistently now is that most of the sales, whether from the disruptors or the existing players, is flowing into the same universe of consumers who are growing either at a small percentage or in a small way. No, no, correct. So if we were to now look on the other side, which is the demand side, how are you seeing that right now and going into the next, let's say, first half of next year?
Samir Arora: No. So that's why, for example, we own Zomato and Swiggy and all, where we are not relying on the end growth of consumer demand and his income so that he is ordering more food. No, no.
It is a change within his buying habit that instead of buying from here, he's buying through the consolidator or this thing. The end growth, we hope that after six, nine months, it will come because the big picture logic is that economies and these big masses don't move within two, three months. So if recently only the disappointments have come on consumption and consumption growth, it can't suddenly change in two months.
It will take six, nine months when the base will change, some confidence will change, some tags will change, something will happen. Suddenly, because the logic is that if somebody recently disappointed the market, that is some consumer company, let's say, and they were previously not disappointing or they were previously trotting along on a normal, whatever low pace or steady pace, they would have tried very hard to not disappoint. So when you disappoint the first time, if you think that is going to be OK in two, three months, then you will basically be able to get over that quarter by jugglery or commentary or whatever.
But when you say it is slow, that means six months have passed. Otherwise, one quarter, everybody can handle. I mean, handle means they will be able to fudge it, if that is the word, if it was only a matter of one quarter, that means you have really thrown in the towel a little bit by talking negative and they all talk negative this time.
So it can't change, according to me, two, three months when the base effect happens or some new trigger happens or the budget has some cuts or something happens to generally bring a little bit more excitement. So I think it's gone for three, six months. This consumer type growth, consumption type growth of the kind we have seen now, these guys grow at three percent, four percent volume.
Both driven by end demand and competition, like in paints, now another big guy has landed up. And if the end growth is very normal, like for five, six months, then you have one more big guy wanting to give discounts or making his entries. That's what I'm saying in all these.
I believe the same thing in consumer durables. So people say that middle class, so they will all buy fridge and TV and they will all buy ACs and microwaves. They will all buy, but on the other hand, they will all make also.
Now, everybody wants to make. From Chroma to Reliance to Flipkart, they don't want to just sell the, they want to make it. So it's a tough environment.
Govindraj Ethiraj: So how do you then, I mean, or rather not how, but, you know, when you assess companies, let's say traditionally you assess companies on the strength of their product distribution, brand marketing and so on. But in an environment when, let's say, the market itself is not growing as much, you are really assessing a player, if you are, on the basis of his or her strength to dislodge someone else, which I think is a little different from being a steady, solid player. I don't know if that makes sense.
Samir Arora: I agree. So therefore, our consumer stocks, we have very few and we are more short than long on consumer because it's this consumer sector where this, A, the consumer sector always had very high valuations. And these valuations went up even more in this bull run.
But their growth rates are not even double digit. So their growth rate is lower than our GDP growth. They are not growing at 7% in volume.
Govindraj Ethiraj: Yeah.
Samir Arora: So that itself is unappealing. So beyond that, you don't even have to do much because they themselves are guiding that if we will have growth, it will become 5%. Who the hell wants that?
But in general, the toughest thing these days is consumer, I agree.
Govindraj Ethiraj: So in which case, if you're now looking for, let's say, new bets in an economy where most companies are not able to grow beyond a certain point, at least right now. Three to six months or nine months. What is driving your investment approach?
Samir Arora: So our biggest thing is in financials, where if you see other than those who were focussing on or had a share in microfinance and personal lending, basically these other guys have done well. So the bigger have done even better, like the banks, private banks, even some of the NBFCs, capital markets, whatever reason, we are booming. So that is also a good segment, these Demat guys and the brokers and all.
Second thing, which is on the margin doing OK, is IT. It's not that they are also growing at 15%, they are not. But hopefully they are going to say higher than last year, higher than last quarter because of basically US having the confidence and the growth rate.
And if S&P 500 is doing well, those companies have confidence and then they are growing. And so that is the second. But our real money has been made in buying these newer age companies, which for us there are four and all have been rockets, which is why our energy is up a lot this year, which is the Zomato, Swiggy, Paytm and the PB Fintech.
Basically, in all of them, you can say that the end consumer demand may be low, normal, whatever, but the shift in usage or from one to the other is the next one or two year story. But then hopefully the end demand also becomes higher and also spreads across different segments.
Govindraj Ethiraj: So I know retrospectively or otherwise, in some of these cases, the stock prices have done well. So in that way, your faith or your investment is already very good because of that. On the other hand, if I remember, anyone who is of your vintage would not have typically invested in companies like these, which are obviously steeply loss making.
Samir Arora: No, no, no, not like that. In this steeply loss making, those days are gone. All the companies of the world which have done well are loss making.
So the thing is, you have to believe that at one day they will make a lot of money and that, as you said, unit economics are good. Now, actually, all of them are making money, but not big money. And of course, part of the reason is they all have cash, so they are earning on their interest.
But basically, they don't need money from you to grow. It's not a loss making company in the sense that, oh, if I don't get funded, I will not be able to grow because they are self-sustaining because of also the fact that they have a lot of cash in their books, like Zomato guy and now maybe 20,000 crores or something.
Govindraj Ethiraj: But when I say loss making, I mean, accumulated losses.
Samir Arora: But accumulated losses, right now the game is that, cumulatively for us also, these are only 15% of our portfolio, but they have given us maybe 5-7, 5% performance out of that 15. So the thing is that at a portfolio level, every fund manager wants at least some 5, 10, 20% where he can dream of 20% revenue growth or 25% that the number of stocks which are offering that has become very limited this year. Therefore, I said and I still say that these stocks are in shortage because every guy will want some of that.
They can't all grow and live on the old consumer guys growing at 5% and trading at 50 multiple saying, I don't want a loss making company unless those companies corrected a lot. So as a portfolio, it makes sense. Individually, somebody may say it's too much to whatever, but I mean, 12-15% combined is we have to keep it and enjoying it.
Govindraj Ethiraj: Yeah. And that sounds fine from a risk point of view or a portfolio construction point of view, which you also talk about as Helios. But I mean, personally speaking, has this meant a transition for you to as a fund manager?
Let's say the way you look at stocks. And that's going to be my next sort of forward looking question as well, which is that is this are you are you looking at stocks differently now and the way you assess? I mean, for example, if there are eight factors, have one or two factors changed almost permanently?
Samir Arora: So what happens is what happens is one of our factors is valuation. But the valuation does not say that it should be profit making. You have to say valuation, does it make sense?
So you will say it makes sense relative to the U.S. company. It'll make sense relative to the growth rate. It'll make sense if I move my year from 26 to 27.
It should make sense on some of these. It doesn't have to make sense on PE or something because of valuation. For example, we in the olden days bought Westlife, which is McDonald's India franchise.
Okay. Franchise means he's a franchisee for West and South. Now that fellow makes losses.
So how to justify? And he literally more or less never made money, but the stock does well and we own it since 2014 or something. So we said that you are getting half of McDonald's India franchise for at that time some 300 billion dollars.
Okay, now it's become 1 billion. So we said, OK, let's see all the other MNCs and what their Indian subsidiary is valued at. Of course, those are subsidiaries.
This is only a franchisee. Okay, so make it double. That means 50 percent weight for the fact.
So, OK, it's therefore if it was a direct McDonald's India, it would have traded and maybe double the valuation, let's say. So therefore calculate like that. And we said that in the Indian businesses, that is Westlife and the one which is in North and East together are valued at some 1 percent of McDonald's worldwide market cap.
But Nestle is trading at so much percent, Lieber is trading at so much percent. So we said they're all trading at 10-12 percent of the parent's market cap. Here is trading at 1 percent.
Even if I double the valuation, therefore it's very cheap. This is my view of it is cheap. There was no profit.
So what I mean is you have to have a model for these to say, can I call it some kind of value? It's like you because it was listed. You are valuing it like a private guy would have valued, but actually it is listed.
So for us, we could buy. So what I mean is even in all these, you can justify all of them. You can justify all of them.
If you believe and it works out that there is growth rate for a few years of the magnitude that it is currently having, which is 30-40 percent, 30 percent kind of thing for these other ones, not Westlife, for the new areas.
Govindraj Ethiraj: Right. And let's come to valuation then since you've touched upon it already. So 24 has seen obviously the stock markets do well, even though there's been a knock in September.
We've also recovered a fair bit already and things look somewhat steady. I don't know how steady, but I want to put that question back to you. But where are we today in terms of perception of valuation and in as a market overall?
And then I'll come to one or two specific questions within that.
Samir Arora: So the thing is, if you look at the large cap company, which is Nifty. So Nifty's returns, if you look at for the last three years, are something like 14 percent per annum. And if you look at it for the last seven years and 10 years and 20 years and 25 years, they'll be 14 percent per annum, plus minus, 13-15.
If you look at the 500 index, which is the more representative index of the overall market, then last year's return might be some 17 percent per annum. OK, and longer term will be again 15-ish. I'm deliberately not saying last five-year return, because they look very high.
Yeah. OK, but last five years, who said that you have to look at five years, you can look at seven years, again, they'll be moderated because the two years prior to the five years was very low. OK, but the big picture is that the Nifty index is more or less, returns are in line with history and the 500 index is say 2 percent per annum more than history for three, four years.
So cumulatively, even that 500 index may be 10-12 percent more than what normally you would expect. But who has to say literally every year it has to be like that? It is not so wildly off that you say, my God, run away.
Because this 10 percent, let us say that you are supposed to go back to longer term average. Does it happen smoothly? Does it happen in one year?
Does it slowly, instead of growing now 14, it grows 12 percent, who is to say? But it is not wild. But what is wild is a few small and mid-cap stocks.
But that also few. There was a report from Kotak Securities about two, three months ago saying that of the 150 stocks, which are called the mid-cap stocks as per SEBI, which is 101 to 250, some 25 stocks were responsible for more than 50 percent of the move of the index. And the balance made some 38 stocks out of the 150, the total 150, were negative or below 10 percent return.
So even there, 20-25 stocks, particularly the Zomato type, even there's our Fintech and all, who have gone up 100-150 percent, Trent has gone up and all these. It's not the average. This year, the Nifty for the full year, which is nearly getting over now, it is up 11 percent this year, right now, 11.4. So it's not wild. Plus, we have not had FII flows. Normally, FII is buy. If you look at the history of the last 20 odd years, there are only four calendar years in which FIIs have not bought net.
So the normal starting stance is to buy, because they also get flows, the emerging market guys get some whatever piddly amount, but everybody gets their proportion of from the world. And so I think the returns next year cannot be as high as this year, because this year, like we are up some 28-30 percent, which is not normal, but to say, without being sure, but to say you get mid-team doesn't look so wide. Maybe you get it in the second half and the base effect is OK.
This year, please remember that April 1 to September 30th, basically nothing has happened in the country in terms of pre-election, then election and then no spending. So next year, first of all, in this quarter, in the next quarter, government will have to spend a lot because they will blow up their whatever budget money they have. And then next year, first half will be comparing with this low April 1 to September.
So six, nine months are OK, because first three, six months is government spending. And then next six months is comparison with a very low base. By that time, the world would have moved on, who knows.
Govindraj Ethiraj: So just speaking to valuation now, I mean, so you talked about, for example, sectors where they were overvalued for even though the growth was not, you know, as strong or as.
Samir Arora: Correctly, particularly the consumer types.
Govindraj Ethiraj: Correct. So now, so there is a reason for that. I mean, one is, of course, the, let's say, these companies, the parenting, the quality of.
That's one reason. But I'm really asking you, I mean, what are the other reasons why companies will get valued or how companies will get get valued as you look ahead? And what would be your own benchmarks or red flags, which are perhaps old ones as well, as in as in when you take calls, particularly longer term calls?
Samir Arora: So therefore, on consumer right now, we are only buying these newer type companies like Zomato, we call consumers, Swiggy, we own this Varun, which is a Pepsi bottler and Westline, which is a McDonald franchising. But we are not buying those old shampoo type companies and soap companies, and neither are we buying the consumer durables. So if there's another story with the shampoo and this thing, which is that previously, the story was that if there is rain, then rural India will get money and they will upgrade their toothpaste or they will brush once a day.
But now I think even their basket has changed of what they want to do if they get money. Maybe they want to take, you know, camera or a phone or photo on Instagram or God knows what. But it's not necessary that what they're doing inside the house, they would spend money on that first.
Also, look at it that when these telecom guys announced that they will hike prices, like Bharti and Jio did. So let us say they do only 30 rupees per month, I think this is what they did. That is 30 means 360 rupees.
And how many consumers are there prepaid? Maybe 80 crores, 100 crores. So there are 80 crores.
Govindraj Ethiraj: Total smartphones is about 800 million.
Samir Arora: But mostly it's prepaid. So even if it's postpaid, their price also went up. I mean, generally, so you have taken away from the consumer 30-40 thousand crores.
It looks okay, you're only taking 30 rupees from each fellow per month, but 360 into 80 crores. So 20-25 thousand crores. So one budget, some thing that you give to the public is only this much, and you took it away in one.
Therefore, we think that the old consumer companies are challenged, because the preferences of the buyer have changed. Plus, there is competition. Plus, they always had high valuations, their growth rate on their own guidance.
Even if there is a turnaround goes from 4% to 6%, which looks very unappealing. That's why we don't buy the old gang.
Govindraj Ethiraj: Right. So as you look ahead, we touched upon auto, you pointed about, I mean, the disruption theory and how that could be actually far more pervasive than we think it is. What are you seeing in 2025, which could be different from 2024?
Also, because we have the Trump factor, which is surely going to affect businesses and trade and so on.
Samir Arora: So Trump factor is positive, according to me, for India, because if imagine if it was Kamala Harris, Kamala, I also say Kamala, and she would have increased capital gains tax, then our government guys would have been licking their lips saying, oh, if US can increase capital gains tax, you think I can't do it? But now they will all realise that, you know, Trump is going the other way. So I'll keep this thing also in check.
Plus, my second thing is that I think he's not going to fight with everybody. If he's going to fight with China, he's not going to fight with India so much. Indians are otherwise nice guys and all that.
So overall, it won't be a bad outcome for India. I think that we should not worry so much. Plus, if the US market is good, we may underperform that market, but you don't become negative.
Which was why I was very bullish from even in October saying it cannot be. If US is up 10% and we are down 10%, that is an unsustainable this thing. Because in the end, if the guys are making money, the fund managers, the investors, the endowments, then they will do average from here.
Maybe not today, but after, say, Jan, Feb, and they see exactly what Trump does. And if they find, you know, he's not really going all against China, you know, all those things will change a little bit. So US doing well is what is good.
It's not a competition. We are nowhere near to compete with US on these things that, you know, because US is 65% of the index. We are about one.
So people say, what happens if US goes up? I think US goes up. They have 33 other percent from where 34 they can get from their more money if they want.
Why are they looking at my 1% rate?
Govindraj Ethiraj: This is the MSCI global or?
Samir Arora: Yeah, sort of MSCI global where India will be 1-2% and US might be 170 or something like that these days. So the idea that US is doing well, therefore, they will take out money from India, that is a small, piddly amount. It's not an equal game to have this.
Govindraj Ethiraj: So from what I've gathered from what you've said, you're seeing 2025 being somewhat consistent with the themes that we've seen emerge in 2024 and with some, obviously, expansion and growth as the case might be.
Samir Arora: So, so a little bit, I think that I think a little bit that change might be that some of these investment type stocks might also do well if government is now seen as having, you know, kickstarted the investment, which were missing for the last six months. Now, you can see already announcements in defence sector and all, which is happening to these PSU companies, and those stocks have done well, like from the bottom, they might be up 15-20%. So it's happening a little bit.
So that little bit change might happen. And we also want the market to be a little broader. And for that, you know, these IT guys giving a positive story in Jam would be also a useful thing.
So we have to wait for that. It is not that it's some runaway market. But even if you made 10, 12, 15%, and it's considered as consolidation, well, nothing wrong with that after so many years.
But there's no logic for it to be down 10-20% for no reason.
Govindraj Ethiraj: That's right. Yeah. And you mentioned PSU.
So you're not seeing any stretched valuations there like some others are?
Samir Arora: No. So we are not owning many PSUs now, because PSUs have two story. I mean, you need two things for the PSU story.
One is that they should be cheap. And now you're right, they are not. And secondly, the government should be seen as saying now change the style of working.
So that also they have done in the first round. But after that doesn't look as a big reinforcement of that. For example, prior to the election, I was dreaming that BPCL will be privatised.
Because there was some logic I had made, which I think was logical. But those things have been left behind. So therefore, now it is neither very cheap, neither there is some extra action in terms of sums.
So now we still own 3-4. But we don't remember them as buying because they are PSUs. You're buying them because okay, you know, like state bank is cheap and good and all that.
Or we own these NTPC because of power. But if you're not looking at it, then we are trying to fill a allocation of PSUs. That's the difference.
Govindraj Ethiraj: And that's a good point that you've brought up something that the expectation that there would be disinvestment or more disinvestment or privatisation. But clearly, the current government has no plans or desire.
Samir Arora: No plans, it looks. That will be a positive surprise if it happens. But doesn't look like, there's no talk of it.
Govindraj Ethiraj: But you're saying that as an institutional investor, this was somewhere in the back of your mind when you invested to the extent that you did in some of these stocks.
Samir Arora: Oh, yeah, but last one year, we did very well. Everybody's expecting the similar things. And then, but we were after election and after budget.
So we reduced our PSUs because for PSUs, you need continuous dream selling. So if you didn't sell more dreams, then we are okay. That's why you went into IT then after that.
Govindraj Ethiraj: So last one or two questions, Sameer. So between asset classes, we've obviously talked about equities all this while. Equities has done well.
And you've just defined or described how you think it will do in the coming year. How are you looking between asset classes?
Samir Arora: We don't look. In our job, we are only India equity managers. But if you ask me personally, I think I have bought everything after Trump fund, which is India, China, gold and US.
Everything will do well according to me. Because gold will do well because they're still worried about Trump and what he does. US, of course, is, you know, liberalisation and deregulation and M&A and generally.
And China, I think in the end, he's not going to do this full thing. Because even yesterday, he said, Tim Cook went and met him. So he's guiding, not guiding him, but trying to influence him.
And then, of course, Elon Musk has a big business in China and all that. And at the end, he's the largest manufacturing in China.
Govindraj Ethiraj: Tesla's largest manufacturing company.
Samir Arora: And the treasury secretary is an ex-hedge fund manager, Scott Besset. So whatever, Bennett, whatever, Besset, whatever. So all these guys are not going to suddenly say, OK, put 100 percent, 20 percent, 50 percent tariffs on China.
So I bought all the four. But order of preference would be US, India, gold, China. Because China is a little bit of a punt.
Govindraj Ethiraj: Got it. And the other thing that affects or influences market to some extent is obviously flows. You've already touched upon foreign portfolio investors.
How are you seeing, you know, the big case that was made in the last couple of years was the strong domestic flows, including through SIP, systematic investment plans, mutual funds and that route, plus maybe some more avenues opening up. But how are you seeing that?
Samir Arora: So we are also now in the mutual fund business. It's crazy. Every day we get some 700, 800 new guys investing.
And we are getting 700 people, we are getting maybe one lakh, I don't know how much. But every day they come from where they come. And we would have already got, I think, from 400 cities.
Now, where they discovered us, how they discovered, because about 40 percent of the money we get is direct. In the industry, supposedly it's 20 odd percent direct and 80 percent through distributors. And for us, it's maybe 38, 40 percent direct.
Govindraj Ethiraj: So when you say direct, you mean they come to your website?
Samir Arora: Yeah, that means they are coming to our website or they are going to Paytm or Zerodha or somewhere or Money Control.
Govindraj Ethiraj: You call that through distribution?
Samir Arora: No, that is direct means he's just basically directly buying. What I'm saying is, where in these three, four hundred cities they heard about us? Who knows?
And they buy on their own. So this, and of course, the NAVs, not only ours, but the industry's NAVs are doing well. And they haven't really seen a bad, like, longer period.
Only maybe October, even there, we were down some 2-3 percent, 2 percent. So generally, right now, there is reinforcement in the eyes of the, in the minds of the customer or investor, because every time he's bought a dip, the market has gone up. Yeah.
His behaviour is getting reinforced. If he buys once or twice and then it falls 10-20 percent, then only we'll say maybe this trade is over. Right now, actually, on the days the market falls, the flows go up 100 percent.
I can see it not direct. Yeah, they go up. So that's why right now it's not a bad thing.
But the other thing good is the market has not gone overall totally out of control. If you want to know what is out of control, let me tell you. So in the years 2004, 5, 6 and 7 calendar years, the 500 index went up 39 percent per annum for four years.
Now it has gone up 17 percent and we are seeing it very. And in the year 1999, the NAV of my fund, which was the Alliance Equity Fund, the NAV went up 280 percent in one year. So that is what we call a bull run.
This is a baby bull run.
Govindraj Ethiraj: So 1999, that would be your tech?
Samir Arora: No, my normal fund, normal fund, but driven by tech. Alliance Equity Fund, which is now Birla Sun Life Equity Fund.
Govindraj Ethiraj: Yeah.
Samir Arora: So the point is, bull run has a different meaning. This 17 percent, why we are all calling it a bull run? Even 4, 5, 6, 7 for four years was 39 percent per annum.
Govindraj Ethiraj: And you're saying the base, of course, which is much higher today, that should not really be the...
Samir Arora: No, no, of course it is. But I'm just saying in those four years, the returns were like that. Obviously, the starting valuations were high.
That's why it did happen. But still, the point is, a bull run is a bull run from wherever it may have started. 17 percent is a few percent more than normal return, which is 14.
Govindraj Ethiraj: Right. So last question, Samir. So if I were to, and you could give me a slightly more detailed answer, if you wish.
What's the one or two stocks that you bought, let's say 10 years ago, or maybe even 20 years ago that you would still buy and why?
Samir Arora: So we actually hold one stock, which we own from 1995, which is HDFC Bank. And it's still our number one holding. OK, and all its life has not been number one, but all its life, it has been somewhere in the top three, four names.
And it is what we call high confidence in reasonable return. The confidence is high, but the returns will not be 30 percent per annum. But hopefully, they will be, I don't know, a little bit more than the market.
And the market, as I said, is 12-14 percent. I know market is 12, it has been 17. So if it is 16-18, it will be great, but who knows.
But the point is that the confidence is high because they are doing the right thing. The stock has not gone up for three, four years because of change of management and takeover of HDFC or merger of HDFC. Those things are getting sorted out.
And in recent months, when the issues of, you know, this lending to unsecured lending and microfinance came up, the most disciplined guys turned out to be the same old survivors. So just like me, I say for myself, in our business to survive is to win. HDFC Bank, if you see in the 90s, how many banks were there, Global Trust Bank, Bank of Punjab, Centurion Bank, 20th Century, I don't know which banks were there.
RBL, Yes Bank, to survive is to win and survive with dignity is to win even more. So these guys are a very easy way. We bought many years ago and we still buy when we get new money.
And when you send us new money, we'll buy again. So please send.
Govindraj Ethiraj: Samir, it was a pleasure speaking with you.
Samir Arora: Thank you very much. Thanks a lot.
