Why Samir Arora of Helios Capital is betting on travel and PSU stocks

A bulk of Arora’s own equity investments have been made through Helios’ funds. On the consumption side, he has turned cautious on traditional consumption themes such as consumer durables and consumer staple. Instead, he has now built up positions on a consumption sub-theme – travel. “Indian consumers want to spend more on experiences. We have hotel stocks, train food catering stock, airline stocks and even a ticket-booking stock in our portfolios," he says.

Arora, who has largely been cautious on PSUs (public sector units), has now added more of these state-run companies in the fund’s portfolio. Thus, last year, Helios’ Indian fund bought stocks of oil marketing companies Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL). “These oil & gas stocks now account for 7-8% of our Indian funds," Arora said during an interaction with Mint for the Guru Portfolio series. In this series, leaders in the financial services industry share how they are handling their finances and investments.

Asset mix

Equities form a major chunk of Arora’s asset allocation, about 85% of his portfolio. Of the remaining, 10% is invested in gold and the remaining 5% is in debt. His equity portfolio comprises 40% of Indian stocks and 45% of global equities.

Barring some of his legacy investments in the Indian markets, all of Arora’s equity investments have been made through Helios’ own funds. In global markets, 100% of equity investments is through Helios’ own fund. In India, 95% is through Helios’ fund, apart from the legacy stocks. His overall portfolio’s weighted average returns were 37% in dollar terms in past year.

PSU play

While Arora has usually stuck to the growth style of investing, he recently also identified a couple of value ideas for his Indian fund. Growth investing is a strategy that allows investors to maximize their capital appreciation by investing in companies with high growth potential. The new value ideas favoured the inclusion of HPCL and BPCL to the fund’s portfolio. “So, the logic was that in 2022, there was a move towards value. So, we said let’s look for the easiest value stocks to buy. And the second is that we also didn’t have many PSUs. So, we thought it would be logical to look at that space. Also, the government had attempted to privatize BPCL in 2022, but that didn’t work out. We felt that they might try that again at some point in time," he says.

The government’s efforts at BPCL’s privatization had stalled amid concerns on fuel pricing and a global push towards green and renewable fuels after Russia-Ukraine conflict started in 2022.

Indian markets

Arora says he is highly bullish on the upcoming full Union Budget that will be presented by the new government post the Lok Sabha elections. “The government wants to cut fiscal deficit to about 4.5% by FY26, which looks tough, but there will be efforts, at least directionally, to reduce it. Prime Minister Narendra Modi has talked about a transformational budget. So, if you want to be transformational, while also keeping fiscal prudence, it can only be done by making large PSU divestments," Arora points out.

“There is only one caveat with respect to budget and i.e. the government should not review equity taxation because there is always talk of rationalization of taxes across asset classes. “Equity and debt should not have the same tax rates. This is because when it comes to equities, dividends are distributed among shareholders from post-tax profits of the company, whereas in the case of debt, the company deducts the cost of interest from its profit and loss (P&L) statement before paying interest to bondholders," he says.

Global play

Helios’ global fund’s peak cash deployment was 22% but that was done last year and “Now, we just have 2% cash in our global fund," Arora points out.

The global fund has maintained its bullish stance on the US technology sector, which has done well in terms of stock market performance in the past year. The fund has 35-40% weightage in US technology stocks.

“We like all the big US technology names, except Apple. We are in all of them. We expect the US tech stock rally to continue as now globally we are seeing a lot more stability. Interest rates are expected to trend downwards, if not now then later, which also bodes well for US tech," he says.

“This is their (US Fed) chance to achieve what they want, but the old excesses were too high and they have to withdraw their old quantitative easing. So, they might as well keep a buffer, for any future crisis. Right now, there is no crisis, so why pump it up again. From their perspective, the more you hold it, you will have more room to cut later on," Arora adds.

While Arora says he will continue to hold onto his positions on US tech stocks despite the sharp run-up, he will avoid deploying new flows in these names (except Amazon) as stock prices have already run-up 100-200% in the last few years.

Stocks that did well

In Helios’ Indian fund, Arora says the stock of food delivery company Zomato did quite well over the past year. He says the stock was up about 266%. In the global fund, stock of AI (artificial intelligence) chipmaker Nvidia delivered 210% returns.

Gold

Arora has usually avoided gold, but he bought gold in 2020, as he says the interest rates were close to zero. “So, the 10-15% I had invested in liquid-type funds, I just put that in gold as I thought that debt is anyway not yielding anything meaningful," he said.

He holds part of his gold investments in the form of physical gold and the rest in gold ounce currency. The gold ounce currency is represented as XAU in forex market, which stands for gold traded against the US dollar.