Three Large Image Funding Themes for India: Finance, Shoppers and IT

India’s Covid-19 cases are on the rise again, but the impact on the market is expected to be limited as investors have some longer-term visibility, Helios Capital’s Samir Arora told CNBC on Monday.

Arora, founder and fund manager of the Singapore-based hedge fund, said investor confidence comes from the fact that reinfection is very low among those vaccinated against the disease.

“I don’t think this will have a serious impact on the market just because the end is otherwise clearly visible,” he said on CNBC’s Street Signs Asia.

“Although we see second and third wave cases around the world, no one really reports that people who have been fully vaccinated have large numbers of cases or that these cases end up in hospitals,” added Arora.

India reported a record number of new cases over a 24-hour period on Monday, beating September levels when the first wave of infections peaked. There were 103,558 new cases, more than half of them in Maharashtra state, bringing the total number of reported infections in the country to more than 12.5 million.

Indian stocks fell Monday afternoon as both the Nifty 50 and Sensex closed more than 1.5% each.

Big picture subjects

Arora, whose fund invests in India, stated that there are three major investment themes that have worked well over the years regardless of the short-term market conditions in the country.

“Those big themes are the main backbone of the fund, and then you may have smaller businesses or sometimes outside of those themes to play around with what is going on,” he said. Still, the big issues “have been around a long time,” added Arora.

1. Finance

Private sector banks in India have over time stolen market share from their government counterparts and served a market where large numbers of people are underbanked and underfunded, Arora said. Although at times some state-owned companies do broadly well, betting on private banks and financial names has been “an easy game,” he said, adding that he likes stocks like ICICI Bank and HDFC Bank.

2. Consumers

India has an attractive demographic profile with 1.3 billion people and a growing middle class of around 300 to 400 million people. According to Arora, products and services that are subdued even in the middle class are an attractive option.

3. Information technology

Indian technology outsourcing companies working with large technology companies have a long history and have generally done well over the years. The purchase will allow investors to “represent the US technology sector,” he said.

Bearish on EV

The Indian electric vehicle market is in an emerging stage with a lot of potential. Analysts and investors have highlighted certain automakers as well as ancillary service providers that could potentially benefit from a switch from internal combustion engines to battery-powered vehicles.

For its part, Arora said that electric vehicles will be “value destroying” for most automakers. He stated that they would face competition from tech names like Apple, Baidu, Xiaomi, and others – many of these companies have already announced plans to enter the electric vehicle market.

These companies “are only sideways trying to get into this industry because this industry now seems to give a chance to new people who may not have been good at automotive, assembly or manufacturing but have a different perspective on electric vehicles,” he said .

As a result, more companies in the automotive market will compete for the same number of users, many of whom may also prefer carpooling to owning their own vehicles, Arora added.

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