The Hindu Business Line : We expect 15-20% return from India: Helios Capital

Fund Manager of Helios Capital Mr Samir Arora believes that earnings slowdown is already reflected in the prices. Mr Arora expects a 15-20 per cent return from the Indian market and is currently bullish on India. According to him, auto stock prices factor in the rate hike impact. He favours private banks compared to PSU banks.

Mr Arora expects one more rate hike from RBI. Excerpts of CNBC-TV18's exclusive interview with Mr Samir Arora:

How are you feeling after this correction?

The correction has been there and expected in some sense. But as I had earlier said, we are bullish now - of course, we have to define what is bullishness. In the past years, bullishness meant 30-40 per cent returns; now bullishness may mean 15-20 per cent return.

So that is still possible and achievable in India.

How will the next 3-6 months pan out in India, with concerns about interest rates, earnings slowdown? Will we get back to new highs anytime in the next 3-6 months?

New highs are a difficult thing because we do not relate so much to the Index. But if you look at the fact that earnings slowdown is related with interest rates,

I think some of that is already reflected in the prices. If you look at the Indian market performance relative to China; the Chinese market is up 24 per cent this year and I think the Shenzhen is up 50 per cent odd and Brazil is up 9-10 per cent, India is down 4-5 per cent in dollar terms. So it is not that the market has stood still while the interest rate went up or inflation fears went up.

Also, earnings expectations for this year from the most bullish estimates are not more than 15-16 per cent EPS growth for `08 or `07. So the point to note here is the markets do not stand still while the rest of the economy changes.

Because of those earnings concerns do you think a lot more adjustments are required?

If adjustment is required, it is required in a few sectors. Even there, we are not sure that it is required but one needs to look at what happened to the market on Monday. From Friday night to Monday, the only negative that happened was that the RBI effected an increase in interest rates.

Even so, it impacts several key sectors such as autos, banks, real estate. In fact in autos, EPS estimates are being downgraded to low single digits from what was double digits, is there problem in those sectors?

That's what I am saying - it is possible in those sectors and it may take some 3-4 months to figure out whether the customers overly care about interest rate in the case of auto.

In case of property, if you look at it in a macro sense, there is no beneficiary of higher property prices except 5-6 companies, all of whom are not even in the Index and all of which are up 30, 40, 50 times except if they did an IPO recently. Even then, they are up from what they thought their own company was worth a year ago. So property prices may correct and may adjust but we should not care about them and actually hope that they fall off lot more.

But in auto, we don't know the exact response of the customers to this new higher interest rate. But normally, if you look at something happening currently and then you react to it, you will lose money most probably.

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