Khemani: Buy banks, aviation, pharma amid war
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- Vikas Khemani of Carnelian describes the current selloff as a "great shopping opportunity" for investors with a 2-3 year horizon, drawing a direct parallel to the 2022 Russia-Ukraine war when oil-price fears and a two-to-three month stretch of extreme market nervousness eventually gave way to recovery.
- Khemani argues that fears of West Asia energy infrastructure destruction are already fading, pointing to Donald Trump's recent statements as a signal that the US has both the incentive and the pressure to push for faster conflict resolution.
- Banks are positioned as the biggest potential winner if geopolitics stabilizes; Khemani pushes back on the bear case that shrinking profit pools and PSU bank competition are structural problems, noting credit growth has already picked up over the last two quarters.
- Carnelian stays away from smaller NBFCs with high borrowing costs — which it sees as forced to chase high-yield, high-risk assets to make their margins work — concentrating its NBFC exposure in large, AAA-rated names with Aditya Birla Capital cited as a significant holding.
- Aviation stocks have taken significant cuts partly on elevated oil prices, but Khemani sees a sectoral tailwind in underlying demand growth and expects falling crude prices post-conflict to directly improve airline economics.
- CDMOs are described as a long-term manufacturing theme Carnelian has held for two years, with biosimilars representing a large opportunity over the next 5-7 years; the firm's sector allocations in banking, pharma, and CDMO remain largely unchanged despite the war.
Why it matters: Khemani's call cuts against the bear case on private banks: they have sold off on external risk, not fundamental deterioration, with credit growth already picking up over the last two quarters. If the 2022 Russia-Ukraine analog holds, the current moment is an entry point — not an exit — for investors with a 2-3 year horizon.
