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If you are ready for volatility, next 10 years could be very exciting: Varun Daga


The pace of companies making profit and the amount of profitability in each of these companies is going up. New sectors have also come up. Ten years back, there used to be IT, pharma and financials. Today there is so much more. There is chemicals. Many more sectors and individual companies have come up and have got listed. So exciting times but be ready for volatility. For people who can stomach that volatility, there is no better place to be, says Varun Daga, Founder & Fund Manager, Girik Capital.

What do you make of the market? The price action in August and September was absolutely stellar. Not only have we gone up in a straight line, we have also managed to buck the global trend. Why do you think India is outperforming in such a smart and handsome manner?
First of all, let us understand or accept that we are in a bull market. I think in the last one or one-and-a-half years, we were just wondering whether this is going to continue but every time, the market has proved everybody wrong. We are clearly in a bull market and this time a lot of industries are also coming around.

We are seeing the old economy as well as new economy sectors firing. I do not think in our 10-12-year history, we have seen so many sectors do well at the same time. Having said that, it reminds me of when we started in 2009. The markets had run up a lot from the lows of 2008. From about 2,600 Nifty doubled to about 5,200. When we started, it was a very similar kind of situation where markets had run up a lot but even from there, in the last 12 years, where the economy has not really performed that well, the index is up 3X. We as a fund are probably up about 10X.

Today, we are probably in a much better situation and the future looks good. Having said that, in our 12-year journey, where the index went up 3X, six times the index fell anywhere from 10% to 38%. Last year, during the Covid crisis, there was a 38% fall on the Nifty index. So from 10% to 38% almost six times.

Almost every two years, we have seen a major fall in the market and the broader index, of course, fell harder. So if one is ready for that volatility, I believe that the next 10 years could be very exciting. We have seen India come up a long way. India will also outperform because the profit pools in India are growing at a very, very fast pace. Ten years ago, there were four companies making Rs 10,000 crore plus profit. Today, there are probably 15 such companies.

So the pace of companies making profit and the amount of profitability in each of these companies is going up. New sectors have also come up. Ten years back, there used to be IT, pharma and financials. Today there is so much more. There is chemicals. Many more sectors and individual companies have come up and have got listed. So exciting times but be ready for volatility. For people who can stomach that volatility, there is no better place to be.

Bajaj Finance will be remembered as the ultimate multi bagger or the ultimate wealth creator for minority shareholders. But the move in Bajaj Finance from Rs 5,000 to almost Rs 8,000 has come in a jiffy. What are markets excited about?
I think everybody is pretty shocked how this happened but what is very clear is this company has always surprised everyone. What they are doing on the fintech side is what the market is excited about. One needs to see how that plays out but there is enough to believe the management because they have really proven in the last decade. Time will tell how it plays out but what is exciting about this sector is that the strong are just getting stronger.

There is a very clear path to growth both on the consumer side and what they are doing on the real estate in terms of home sales and home financing, the mortgage book. The growth is very clear and then there is an optionality of what they are doing in the fintech side. The market is willing to give a much higher multiple for that optionality. And it will be interesting to see what happens.

I do not see too many auto stocks or any bet on EV in your portfolio. Why is that?
We follow our system, our screeners and for us to really make a case, we want to see a clear trend, a visibility in earnings. Till now, we have had some odd stocks come up but we want to really see that industry tailwind like we saw in IT or metals or chemicals, unless it is a clear individual company where the sector really does not matter.

But a large part of our investing revolves around choosing the right industries because one chooses the right industry, half the job is done. History tells us that if we are in the right industry, it is much easier to make money. We are still not seeing that kind of earnings momentum in the auto sector but maybe it is around the corner and we are okay to be a little late as long as the story is very secular.

Similarly on the EV front, many stocks have done well but it is a lot in the future. We would be happy to see some more numbers come around and let us see how it really goes but it sometimes gets a little tough to make a case and we really want to be sure about what is happening. Let us see how it goes.

Which is the next IPO you are looking forward to? Zomato has been a success but now Nykaa, Policybazaar, Paytm are going to comeWhich is that one big exciting business or IPO you are looking forward to?
Nykaa is probably one of the best businesses we have seen for a long time. We really like Zomato also but Nykaa is phenomenal and it will be exciting to see how Nykaa does. We all pray for good valuations but we do not get them at good values. I think keeping valuation aside, these businesses are phenomenal. I do not think India has seen such great businesses coming for IPOs for a long time. Probably for the first time, India has seen such amazing businesses which are so well run, which are growing so fast and have such phenomenal opportunities ahead of them. It will be exciting to see some of these IPOs.

I would say Nykaa number one, probably Policybazaar number two but even some of them which are already listed like Zomato are very exciting. Yes, they are expensive and everyone is worried about losses but let us see what they really create because if they can really do what they promise, sky’s the limit. So yes, Nykaa would be very exciting.



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