Carnelian has moved into the mutual fund business with a small-cap fund that has a ₹5,000 crore cap. Founder Vikas Khemani is now explaining how he plans to run it.
In an interview, Khemani said the fund is focusing on manufacturing, financials and IT. His search for emerging themes spans a wide range of industries, from contract development and manufacturing organisations (CDMO) to aerospace.
He also warned investors against a common mistake: treating market capitalisation and valuation as the same thing. A company can be small by market value without being cheap, and a larger one can still be reasonably priced. Judging a stock by its size alone, he suggested, can lead investors to the wrong conclusions.
The interview also covers three practical questions facing a small-cap fund:
- Managing size: how the fund intends to handle its size, given the ₹5,000 crore cap.
- Expensive growth: how it will assess growth opportunities that already look costly.
- Re-rating: how it plans to position itself for the next re-rating of the market.
For investors, Khemani’s message is to look at what they are paying for a business, not just how big or small it is, when judging small-cap opportunities. The fund’s focus on manufacturing, financials and IT shows where Carnelian expects to find them.