When to buy LIC stocks & why one should remain cautious in the market: Samir Arora

“Right now, there is no polarisation in the largecap stocks because money has come in directly from the domestic investors and not just through mutual funds. Maybe they feel it is boring to buy bigger companies and because of that, polarisation has not happened,” says Samir Arora, Founder, Helios Capital

What do you do about LIC? Though it had a tepid listing, it is one of those portfolio must haves. What would be the right price?
The price is quite good and I thought last time when I came that we will apply but we did not apply because by the time the issue opened, the markets were so much weaker but I think in a slightly longer term, one would not lose a lot, which itself is a big highlight in these markets.

Hopefully, the investors make some money because retail has been such a big part of this IPO but overall, I think it will do well. It may not do super well because the market is like that and the issue is big. Of one does not do well in the first five-seven months, then suddenly one may come closer to the date when the second tranche of issues might come.

Look at these loss-making companies which are doing well. Now if the present prices had been the IPO prices, we would have been very happy to buy them, but today we are still nervous about buying them because now suddenly the one year lock-ups of all these private equity funds holding the stocks are over and they will also have to decide whether they want to roll the dice for another X number of years because they have finished their five-seven years. So when the overhang comes very close, then the prices can fall further .

Also Read: We are in a bear market which is about to end in a few months

In the environment, if LIC has to do well, it should do well in the first four-five months. If it is doing well by the 9th and 10th month then maybe after the 12th month, the government will again look to sell more. Therefore I hope that it does well now and if we have to buy, we will have to buy it in the next few months. Otherwise, everybody will keep waiting for the next tranche.

Any new magic tricks that can take the market up now?
These are serious times. One should be a little cautious. It is not that anybody is supposed to stop his SIP. I just do not like the other end that every evening, at 5 O’ clock we have to say this is the best day to invest and invest your 100% money and you will never get it or when the market falls., say I do not look at the economy, I do not look at inflation! What do you mean you do not look at it? It means that you cannot predict it; but if you are in the middle of it, you can look at it also. There is nothing wrong and there is nothing to be proud of in the middle of things saying I do not look at these things.

You can say I cannot predict it. Last year, in November-December, we also did not know what it is but when the Federal Reserve is saying, when the Indian Reserve Bank is saying that they are coming with in-between hikes or a surprise hike, we cannot say we do not look at it. We have to look at it because it makes a big difference if the market is down 10-20%. The US it can easily fall 10% odd more because there is no episode in the last 30 years where the market has gone up without the Federal Reserve intervening right at the end. But now they are not intervening to help and if at all, are coming in only to be more negative.

The market falling is part of the requirement of the Federal Reserve. Otherwise, they will keep pushing it. And if the US falls, we can outperform but we cannot really be rocking here. So just be a little bit careful, is all I say.

Equity comes with an underlying risk and ultimately equity is about volatility; it is not a fixed deposit where you will get straight line returns.
I was worried over the weekend about the Bitcoin and the Tether because there is no way Tether can stand because it is like this, if you have a bank deposit and for a few weeks they say or for one day they say that oh my God maybe the deposit you are not going to get it back and one hour later they say that we have got funding for x number of billion dollars, so do not worry, you can take your money or leave your money with the bank, do you think anybody will say okay thank God two billion dollars has come and so I would not take it out?

Unless you say that it has become a nationalised bank then maybe you can keep the money. But if you just say that I got some funding and so the public deposit is safe, won’t you quietly take out the money?

In terms of the setup, I am just trying to draw a parallel here. The last time, we had inflation fears, we had a similar situation where macro was a bigger concern than micro. We saw a massive underperformance in mid and smallcap stocks and then a polarisation of the market started which is only 8-10-15-20 stocks did well. Could that happen again this time?
Right now why it has not happened is because the money has come in from the domestic guys and not just through mutual funds, but directly. Maybe they feel it is boring to buy bigger companies and because of that polarisation has not happened. So, in a sense, everything is relative.

I am a bit nervous about the Indian market because I am nervous about the US market and if the US market is bad, the Indian market cannot be good. It is the same story; if the largecaps are not good, then the midcaps cannot be good and therefore it is a continuum. Right now, only because of the flows, I would agree it is not polarised but the largecaps have to do better than the midcaps because the premium of midcaps to large caps is quite high.

There is no reason for that because they will grow a little more because even that growth has now been questioned and already in the tech sector, where the IT services companies, which were trading at 45-50 PE have got hit much more than the 30 PE stocks, even though overall everybody has fallen.