Themes that may not have worked over the past decade may now thrive amid market volatility brought on by macro challenges, according to Girik Capital.

Charandeep Singh and Varun Daga, co-founders and fund managers at Girik Capital, tell BloombergQuint’s Niraj Shah that the portfolio manager is optimistic about oil and old-economy stocks in the capital goods sector, given energy demand and India’s capex push.

In December 2007, oil and gas companies made up 25% of India’s leading indices. But today, excluding Reliance Industries Ltd., that share is barely at 4-5%. Similarly, financial services used to only comprise 8-10% but peaked at 42% just before Covid-19 hit in 2020.

Singh and Daga called this change in the Indian stock market to advise investors “keep an open mind” and emphasized the need to review themes that may now be more appropriate.

According to Daga, the world is “underinvested” in energy, making oil a good bet. “Globally we see money flowing back into energy. Warren Buffett has also invested in such a company. It has played out in the past and it could happen again. We have to see if the growth can hold. Money will chase profit and growth .”

The fund expects the manufacturing sector and “old economy” stocks to do well. Daga recommends capex affiliated consumer companies, including companies that manufacture bearings and abrasives.

“It’s an exciting space. You have to find industries that only have a few leaders,” he said. “Break it down so that when there comes an upcycle, a few companies take the pie, and if it doesn’t come, they don’t lose much.”

Still, Girik Capital is sitting on “above-average” cash, as they’ve taken money from “old winners” and lowered stocks that haven’t succeeded, Singh said. “This wasn’t a market-based cash call; rather, it’s a factor of what individual stocks told us.”

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