This PMS is betting on India reaching 16% of world GDP by 2047

Vikas Khemani, founder, Carnelian Asset Management.
Vikas Khemani, founder, Carnelian Asset Management.


  • Vikas Khemani aims to tap into India's projected economic boom, focusing on sectors like manufacturing and banking, as the country targets a $29 trillion GDP by 2047.
  • His new fund plans to leverage long-term growth trends and foundational shifts in India's economic and geopolitical landscape.

Vikas Khemani, the founder of Carnelian Asset Management, which manages over 3,600 crore, is setting his sights high with plans to launch a new venture—the Bharat Amritkal Fund, a category III Alternative Investment Fund, requiring a minimum investment of 5 crore.

With this fund, Khemani, a Portfolio Management Service (PMS) manager, aims to capitalize on India's economic trajectory, betting on sectors expected to undergo substantial growth, including manufacturing, banking, infrastructure, and consumption, as the country targets a $29 trillion GDP by 2047, accounting for an estimated 16% of global GDP.

This strategy also reflects Khemani's confidence in an outright victory for the Bharatiya Janata Party (BJP)—a thesis that now looks a little shaky.

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Mint spoke to Khemani in detail about his strategies, and the vision behind the Bharat Amritkal Fund. Edited excerpts:

What’s the concept behind Bharat Amritkal Fund?

With markets experiencing significant growth, the questions we often receive from clients focus on market sentiment and valuations—market kitna lagta hai (What’s the mood of the market), how are valuations looking, etc. This led me to adopt a broader perspective, to showcase the potential that lies ahead. By taking a long-term view, we recognize that India is entering a unique phase of development. From our experience, substantial returns are garnered from prolonged investments, but such commitments require strong conviction in the outcomes.

Over the next 25 years, as India progresses towards becoming a developed nation, Carnelian Asset Management plans to invest in companies poised for substantial growth. While we don’t necessarily hold every company for 25 years, our strategy is to build a diversified portfolio designed to capitalize on both short-term and long-term trends.

Currently, India’s GDP is slightly under $4 trillion. By 2047, at the conclusion of Amrit Kal, we project it to reach between $29 trillion and $30 trillion. Our per capita income is expected to increase from $2,500 to $18,000, positioning India to account for 15-16% of global GDP. This growth is feasible thanks to extensive foundational work, economic reforms, and advancements in digital infrastructure.

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Moreover, India has undergone six significant shifts: from incremental to exponential growth; from constrained to unconstrained thinking; shifting away from Western dependency towards indigenous solutions; innovating at scale and low cost; enhanced social welfare; and a more pronounced presence on the global stage.

(Graphic: Pranay Bhardwaj)
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(Graphic: Pranay Bhardwaj)

But that's at a macro level?

Indeed, these are broad megatrends. However, within these, we are identifying specific themes and opportunities. We have organized these into five key sectors: banking & financial services, manufacturing, services, infrastructure, and consumption. Within each sector, there are numerous sub-trends, and the goal of the Bharat Amrit Kal fund is to tap into these nuanced areas. We carefully analyse the macroeconomic environment to pinpoint sectors poised for significant benefits.

Consider the banking and financial sector: In 2000, total banking credit was $125 billion. Today, it stands at $2.5 trillion despite several challenges. Over the next quarter-century, we could see this figure reach $60-65 trillion—a scale that's based on historical data and not mere speculation. In 2000, the total market cap of banks was $9 billion; now, it has surged to a trillion dollars.

Regarding portfolio construction, we aim to include 25 to 30 stocks, with the top 25 receiving 80% of the allocation, while the remainder will comprise 5-6 stocks. The fund will employ a flexi-cap strategy, generally maintaining 30-40% in large caps, with the rest distributed among mid and small caps, ensuring no undue concentration in any category. Additionally, our 'shift fund' focuses predominantly on manufacturing and technology sectors.

Another theme that has become popular is quantitative-based investing. How does your approach compare?

I wouldn’t say quantitative investing is trending or any such thing. Ultimately, we are right now seeing a good bull run and anything that is growing is working.

The way we select companies, you can very well put it into a filter and make it a quantitative thing. Just because we don’t call ourselves quantitative funds does not mean they’re all very different. For instance, when you look at earnings growth, particularly ROC (Return on Capital) and debt to equity, etc, we are essentially using numbers and the quantitative guys might be doing the same thing. I don’t think there’s any fun in doing only quantitative.

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The churn part is something I agree with you on. In a rising bull market, churn is easier and I would like to see what happens when the tide turns. I’m neither for nor against it.

At least for us, our investing style is working very well, it has been tested across time frames and our performance is reasonably enticing, our shift strategy in the last year has delivered for the last four years a 46% CAGR and alpha of 20% per annum, our first multi-cap fund, the Carnelian Compounder Fund has delivered 24.9% CAGR post our expenses vs 16% benchmark returns for 5 years in the multi-cap fund.

You’ve set a very high threshold of 5 crore. Why is that?

The thinking was that we wanted to have a maximum of 1,000 investors and we want to raise 5,000 crore. Incrementally we’ve seen that it’s not a big amount. I jokingly say that 5 crore is the new 1 crore. There was a time when PMS started with 5 lakh, now it's 50 lakh. Plus, our clients are large HNIs and family offices, so there’s no issue.

How do you assess valuations in the current market?

Valuation is based on three primary components: yield, growth in yield, and the discounting rate. In India, the RoE stands at 15%, the highest globally, with earnings growth between 15% and 20%. Our discount rates are at historic lows, with only a 1.5% difference between US and Indian 10-year papers, and decreasing risk premiums. A 2% reduction in the discounting rate could enhance equity valuations by approximately 30%.

What’s your strategy for the elections?

I firmly believe the current government will be re-elected, whether they secure 350 or 400 seats. Even if they only achieve 300 seats, for the long-term investor, these numbers are less consequential. Our focus remains on the broader policy environment which I anticipate will continue to be favourable.

India doesn’t seem to produce innovative tech companies like the US. Are you missing out by focusing only on domestic companies?

Our investment strategy doesn’t solely rely on technology stocks. While tech giants in the US, like Nvidia, have shown impressive returns, similar opportunities exist within the Indian market across various sectors. Our diverse portfolio has demonstrated comparable growth, proving that significant returns are not limited to tech companies alone.

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