Best days of mid-cap and small-cap segments are over: Samir Arora

Interview with founder and fund manager, Helios Capital

As expected, Budget 2018 has reintroduced long term capital gains tax (LTCG) on sale of equity shares, which SAMIR ARORA, founder and fund manager, Helios Capital believes is the real negative in among the proposals announced. Indian markets, he tells Puneet Wadhwa, will underperform global markets for the next few months. Edited excerpts:

What is your interpretation of the Budget 2018 proposals? And, do you think it is enough to boost India's economic growth and corporate earnings?

The 2018 budget focuses on the right issues, led by rural sector. It is clear that the Indian farmer and rural poor has not fully participated in the growth of the Indian economy and needs significant hand holding and no one can object to higher allocations and programs for this group. Corporate earnings were expected to be strong even before any budget announcements. The budget may help sectors that feed off rural demand like two-wheelers, agriculture equipment etc.

What is your view on the way long term capital gains tax (LTCG) has been imposed – on the amount of gain and not the tenure? To what extent can it hurt investor sentiment?

The real negative from Budget 2018 is the imposition of LTCG. However, now that the tax is already imposed, one has to move on, which I think will happen after 5 to 10 per cent underperformance in India relative to other markets.

What next for the markets? What are the likely triggers and risks over the next 12 months?

I think Indian markets will underperform global markets for the next few months. However, if the global markets remain strong, we may not feel any real pain as we will also go up – even if we underperform.

What’s your view on the mid-and small-cap segments?

I think that the best days of mid-cap and small-cap segments are over.

Given the tone of the Budget, do you believe the government may prepone the general elections? Are markets factoring in such a move?

Mr Jayant Sinha has already said in an interview that this is a political budget. So whether the elections are preponed by a few months or not, it does not matter. That said, it is clear that the budget has been made keeping in mind that we have elections next year, but that should not surprise anyone.

The Budget had laid a lot of emphasis on infrastructure development and agriculture. Should one invest in related stocks from a 12 – 24 month perspective?

Absolutely. We ourselves hold many infrastructure-related stocks. We don't hold any direct agriculture stocks, but may consider them if we get some good ideas.

What are your top recommendations in the backdrop of the budget proposals and what lies ahead for the markets?

Our stock recommendations don't change so easily. We continue to like private sector banks and consumer stocks and a few infrastructure stocks.