Arora laid out four reasons for the shift in mood. “India is doing very well if you see what are the changes that have happened over the last three-four months,” he said.
Four reasons for the turn
The first is trade. The US tariff rate on Indian exports, which had climbed as high as 50%, is now down at 10%, Arora said. He brushed aside the idea that a formal trade deal is still needed. “People keep saying we need a trade deal. I don’t understand. We don’t need any trade deal. This is the deal for the world. This is the deal for us,” he said.
The second is the rupee. He said, “We had our currency which was weakening and was completely out of line with regional and other currencies and now that is no longer happening. For two months, we have been flat of course because of these FCNR reserves or flows.”
The third is a fading of the “AI trade” that had been pulling global money away from India and into US technology and semiconductor stocks. Arora said both ends of that trade — the big spenders and the chipmakers benefiting from the spending — have themselves come under pressure recently, narrowing the gap that had made India look unattractive by comparison.
The fourth, and the one Arora called most important, is earnings. Corporate profit growth that was running at 7-8% a year or two ago has picked up to roughly 18-20% overall, with midcap and smallcap companies growing even faster, at around 20% and 30% respectively, he said.
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HDFC Bank: “more confused” than two weeks ago
The one clear negative in the conversation was HDFC Bank, the largest weight in India’s benchmark indices. Arora has spoken favourably about the stock in the past, but said the succession picture at the top has muddied since the bank confirmed it would also consider external candidates for the CEO’s role, on top of internal ones, once the current MD and CEO’s term ends.
His concern isn’t with the outgoing CEO’s record, he said, but with how the transition is being handled: “You can’t have an external guy coming in… a new CEO itself, people will evaluate for two years. And if the new CEO is from outside the bank, it’s more difficult.”
The stock was trading at ₹702.35 at 10:24 am on the NSE and has declined more than 25% over the past year.
Selective on IT services
On IT services, a sector where Arora has remained cautious, he said Helios currently holds one stock but is looking for companies with stronger growth prospects before increasing exposure.
He said the fund would consider companies that can deliver meaningful earnings growth rather than those guiding for flat or low growth. The broader objective is to invest in businesses that can generate returns of around 12-15% in rupee terms.
Arora does not expect IT services companies to see a meaningful re-rating until earnings growth picks up. In his view, companies need to demonstrate growth first before investors are likely to assign them higher valuations.
For the entire discussion, watch the accompanying video
