Capturing the spirit of entrepreneurial India (September 2025)

In our latest webinar, Mike explores:

  • How India’s entrepreneurial drive is reshaping investment opportunities

  • The overlooked market segments powering Alquity’s differentiated portfolio approach

  • The latest economic and portfolio update straight from the desk of the fund manager

You can watch the webinar here:

And you can download the slides here: https://alquity.com/wp-content/uploads/2025/08/Alquity-India-Webinar-September-2025.pdf

Why India?

It’s one of the biggest economies in the world, has one of the strongest projected GDP growth rates and is home to the largest population on Earth. Despite these credentials, it’s fair to say, at best, most investors have limited exposure to India. 

Investors have long believed that putting their money to work in an emerging market or Asia fund is enough, but India is experiencing multiple tailwinds that are propelling its global ascendency and those with purely token exposure ought to reconsider.  

For many years there has been talk that the 21st century will be India’s century, just as the 20th proved to be America’s, and the 19th is considered Britain’s. Whether this comes to pass or not, there remain many reasons investors need to be paying more attention to India.  

India = growth 

First and foremost, India is a growth story. In mid-2025, India became the world’s fourth largest economy after its GDP nudged ahead of Japan’s (see Table 1), according to the International Monetary Fund (IMF)(1).  

By the end of this decade, the IMF is projecting that India will overtake Germany to become the third largest economy in the world, as it is on course to hit $6.77trn by 2030, compared with Germany’s forecast of $5.58trn(2). 

Table 1

India is projected to achieve real GDP growth of 6.2% in 2025(4), which is the strongest among the countries listed in Table 1. Its closest competitor is China, which is forecast to achieve 4% growth(5).  

Seven of the top 10 economies are on course to grow between 0.4% and 2% in 2025. The only outlier is Germany, which is not expected to record any real GDP growth(6).  

India = ambition 

In addition to the positive and improving economic outlook, Prime Minister Narendra Modi has outlined a series of ambitious targets. When India marks its centenary of independence in 2047, the goal is that the country will also be able to celebrate its elevation from emerging to developed market.  

As such, in November 2023, his government unveiled Viksit Bharat(7) (Developed India), a declaration of intent to uplift all facets of India’s society and economy. The primary goal is for the country to become self-reliant and prosperous by 2047(8).  

Growth is the game plan. To achieve the government’s ambitious GDP target of $30trn by 2047 – the current size of the US economy – India’s economy needs to grow more than seven-fold over the next two decades. This means, on average, GDP needs to rise by 8-10% every single year.  

The social and economic reforms outlined by the Modi government are expected to be among the primary accelerators of this growth.  

Steps have been announced to improve the ease of doing business in India, as well as greater support for micro, small and medium-sized enterprises (MSMEs) and startups(9).  

Efforts have long been underway to help mostly small and rural businesses transition from the informal to the formal sector, as these companies are recognised as an essential and growing part of the Indian economy.  

A successful transition means companies will be able to access finance and government support, as well as benefit from greater legal and regulatory protections(10). Workers will enjoy legal protections, like a fixed salary; healthcare benefits; paid leave; and retirement savings(11). 

India = demographics  

Equally important are the social reforms Modi’s government has outlined as part of Viksit Bharat. These include zero poverty, female empowerment, quality education and affordable and comprehensive healthcare. 

In April 2023, India’s population reached 1.42bn, surpassing China to become the world’s most populous country. The UN estimates that the number of people in India will peak at around 1.7bn by the 2060s, whereas China’s population has already started to decline(12).   

Importantly, India is home to a lot of young people. According to the US Central Intelligence Agency (CIA), as of 2024, the median age of India’s population was 29.8 years. This compares with 49.9 years for Japan, 46.8 in Germany, 40.2 years in China and 38.9 in the USA(13).   

A young, healthy and well-educated population creates a virtuous circle of growth. It will result in a stronger workforce that is able to take on more high value jobs, which means higher wages, a larger middle class and even greater discretionary spending.  

India = business 

When investing in India, most fund managers turn to the MSCI for ideas and inspiration. Comprised of the large and mid-cap segments of the market, the MSCI India Index is made up of 158 companies, covers 85% of the Indian equity universe and falls into 11 broad sectors (see Chart 1)(14).

Chart 1

Investors, therefore, tend to be largely exposed to India via ETFs and funds that are dominated by large cap companies, which means they miss out on the opportunities available in the small cap space.   

Indexes are also backwards looking, recognising the achievements of the past but not necessarily the growth opportunities of the future.  

Research from McKinsey has identified 18 transformative ‘arenas’ in India (see Table 2) it believes ‘could experience significant growth, technological advancements, and sustained investment dynamics’(16).  

The report stated: “Nine of these are global arenas where Indian companies could attain disproportionate growth through distinctly Indian capabilities. The other nine are what we define as ‘national’ arenas or sectors that could advance long-term strategic interests and fuel growth in a uniquely India-specific context.  

“This mix of global and national arenas could play a pivotal role in realising India’s vision of becoming a developed economy by 2047,” the McKinsey report added(17).    

Table 2

When compared with the (admittedly) broad categories included in the MSCI India Index (see Chart 1), the full extent of opportunities that investors risk missing out on becomes clear.  

And there is no shortage of current and budding entrepreneurs in India. The 2024/25 Global Entrepreneurship Monitor, which assesses national levels of entrepreneurial activity each year, ranked India fifth out of 56 countries(19). It found that 85% of Indians are confident they have the skills or knowledge to start their own business. A similar proportion said they felt it was easy to start a business in India.   

India = opportunity 

Investors often have a myopic view of India. The 158 predominately large caps in the MSCI India Index overshadow the fast-growing and innovative smaller companies that are emerging each year.  

India’s size, scale, population and strong growth don’t seem to generate the same level of international headlines as other countries.  

But there are so many factors at play that all point to a bright future for India. It boasts a strong and growing economy, an increasingly well-educated and healthy population, and strong levels of entrepreneurship. All of this is backed by a stable government that has demonstrated how ambitious it is.  

Investors need to take note. The Indian growth story is far from over.   

 

Disclaimer: 

This is not an offering memorandum or prospectus and does not constitute investment advice. This is a marketing communication that is intended for information purposes only. The content, including external data sources, is believed to be reliable but no assurances or warranties are given. The companies mentioned are shown for illustrative purposes only, do not constitute investment advice, and are not a recommendation to buy or sell any security.
Investments in emerging markets, including India, involve greater risks, including political, currency, and liquidity risks.
Prospective investors should read and understand the terms of the Prospectus (including the risk factors) prior to purchasing units in any of the funds. There can be no assurance that the fund’s investment objectives will be achieved and investment results may vary substantially over time. We do not provide financial, tax or legal advice and we recommend that you obtain your own independent advice tailored to your individual circumstances prior to investing. Prospective investors should be aware that the value of
investments can go down as well as up and past performance is not an indicator of future performance. Investors should be aware that by investing in the fund, they risk losing all or part of the capital invested. The Alquity Asia Fund, Alquity Future World Fund, Alquity Indian Subcontinent Fund and Alquity Global Impact Fund are sub-funds of the Alquity SICAV (the “Fund”), which is a UCITS-compliant investment vehicle and a recognised collective investment scheme under the Financial Services and Markets Act 2000 (FSMA) in the United Kingdom.
The Alquity SICAV is an open-ended investment company managed by Limestone Platform incorporated under the laws of Luxembourg and authorised by the Commission de Surveillance du Secteur Financier
(CSSF). The Fund is authorised under the UCITS Directive (Directive 2009/65/EC). Sub-funds may not be registered for distribution in all jurisdictions. Alquity Investment Management Limited acts as the investment manager to the SICAV.
This marketing communication is issued by Alquity Investment Management Limited (“AIML”) for distribution both within and outside the United Kingdom. AIML is incorporated in England and Wales (Company No. 07992381) and is authorised and regulated by the Financial Conduct Authority (FRN 463991). Its registered office is Audrey House, Ely Place, London, EC1N 6SN.

Sources:
  1. International Monetary Fund
  2. International Monetary Fund
  3. International Monetary Fund
  4. International Monetary Fund
  5. International Monetary Fund
  6. International Monetary Fund
  7. India’s Journey to Becoming a Global Superpower
  8. Meaning, Vision, Objective, Registration
  9. Bold Vision, Brighter Future
  10. Rethinking Formalization
  11. The Transition of India’s Economy Towards Formalization
  12. Department of Economic and Social Affairs
  13. CIA – Median age
  14. Blackrock – iShares MSCI India UCITS ETF
  15. India’s future arenas: Engines of growth and dynamism
  16. India’s future arenas: Engines of growth and dynamism
  17. India’s future arenas: Engines of growth and dynamism
  18. The so-called Bio-to-X market includes various sectors that exploit biological raw materials, such as biofuels and bioplastics
  19. Global Entrepreneurship Monitor

 

Beyond the big caps: India’s entrepreneurs are the real growth story

From V-Mart’s Lalit Agarwal, who turned a family tailor shop into a 500-store fashion chain, to ixigo’s Aloke Bajpai and Rajnish Kumar, who built one of India’s leading online travel agencies – these are stories of purpose, resilience and long-term vision.
At Alquity, we believe founder-led companies are a vital part of India’s economy and can offer some of the most dynamic long-term opportunities.
Read now the full article.

The Rise of Domestic Indian Travel

India covers more than 3.2 million sq. km and, home to 1.46 billion people, it officially became the most populous country in the world in 2022. With mountains, deserts, rainforests, plains and plateaus, the Indian peninsula boasts a wealth of natural wonders.

So, it is little surprise that improving infrastructure and a burgeoning middle class are driving domestic travel and tourism.

“India is like a country of 100 countries,” says Mike Sell, Head of Global Emerging Market Equities at Alquity Investment Management. “Leisure travel is a great story and it’s a real standout because its really strong growth has not been impacted by the so-called slowdown seen in other areas of the economy.”

He adds: “People think India has a growth problem, but it really doesn’t. Growth has been a bit weaker, temporarily, but throughout all that the travel sector has gone gangbusters.”

Skin in the game

Within the Alquity Indian Subcontinent Fund, the travel theme is represented via two key sectors: online travel agencies and hotels.

“Everything in life is a cycle, and hotels are a prime example,” Sell says. “If you have lots of hotel supply coming up and not enough demand, prices go down. And vice versa. But you can’t create a hotel overnight and in a very crowded city you can’t create one at all. Hotels have amazing supply and demand fundamentals.”

The fund primarily invests in domestic growth drivers, so the team seeks out homegrown companies that deliver local services.

Lemon Tree Hotels is one of the larger weightings in the fund. The company identified a gap in the market, recognising there were few options for travellers seeking mid-tier and economy accommodation.

Its first hotel, which offered 49 rooms, was opened in 2004 in the city of Gurugram (previously Gurgaon), which lies to the southwest of New Delhi. Today, it has 110+ hotels in over 64 cities across the country, offering circa 10,300 rooms.

Sell says: “As with many of the companies in our portfolio, Lemon Tree is still run by its founder, Patu Keswani, which leads to a greater level of dynamism in decision-making, given Mr Keswani has direct ‘skin in the game’.”

Having listed in 2018, the pandemic proved an early challenge for Lemon Tree. Its share price recovered by late 2021, however, with strong growth recorded in the following years.

The company remains ambitious and, while the team’s interest in them is primarily centred on their domestic growth story, Lemon Tree opened its first international hotel in Dubai in 2019, followed by Bhutan in 2020. More international locations are in the pipeline. By 2028, the company is targeting more than 20,000 rooms across more than 300 hotels.

“Our conviction in the company remains high, given their robust business model geared to the long-term structural growth in the sector, strong barriers to entry and dynamic management,” Sell adds.

Attractive fundamentals not artificial index constructs

The rise in travel is being facilitated by online travel agencies, which also plays into another key theme in the portfolio, internet-enabled companies.

MakeMyTrip is a prime example, offering hotels, flights and holiday bookings via its website. Founded in Gurgaon in 2000, it has been in the Alquity Indian Subcontinent Fund since October 2023.

MakeMyTrip recorded incredibly strong share price growth in recent years. Having listed in 2010, it struggled to break through $40 per share until Q3 2023. The price per share subsequently accelerated through $50 and $100 during the course of 2024.

“As with Lemon Tree Hotels, we are attracted to the multi-year sector dynamics of the travel sector and the comprehensive ‘moat’ surrounding the company,” Sell explains. “Whilst the fact that this company is not included in the major Indian stock market indices may act as a deterrent to certain peers, we are firm believers in focusing on attractive fundamentals rather than artificial index constructs.”

An equally ambitious government

The Indian Government has allocated significant funding in recent years to modernise domestic infrastructure. For the financial year ending March 2024, capital expenditure was nearly 30% higher than in the previous financial year. Compared with four years ago it is 2.8 times higher.

Billions of dollars have been channelled to key areas such as roads, railways[1] and airports. A prime example of this improvement drive is the public-private partnership behind the construction of Navi Mumbai International Airport, meaning India’s second largest city will be served by two international airports from June 2025.

These improvements further catalyse the domestic travel story, as it makes it easier for people to access more far-flung destinations. Especially for shorter, perhaps weekend, trips.

That said, while air travel is an obvious way for people to move around, it is not a sector the Alquity Indian Subcontinent Fund invests in.

“Airlines are problematic because there are more things that can go wrong. They are very sensitive to currency changes, the fuel price and accidents,” says Sell. “We feel there are better ways to play the leisure story.”

As the two examples above clearly demonstrate, there is no lack of ambition or opportunity when it comes to India’s domestic travel sector.

Relatively insulated against tariffs

India is on course to become the world’s third largest economy within the next couple of years. With a growing middle class and rising disposable incomes, average household incomes are expected to increase circa 1.4x between 2020 and 2030.

Backed by strong demographics, a stable government, improving infrastructure and burgeoning domestic growth, India is forecast to deliver GDP growth of circa 6.5% every year until 2029[2].

April witnessed US President Donald Trump unveil a series of, what the White House called, ‘reciprocal tariffs’. While they are a gamechanger for the world economy; India, in many ways, is insulated against much of the turbulence. The tariff rate for India was set at 26%, but exports to the US account for just 2.7% of GDP and they are expected to play little role in future growth.

The companies in the Alquity Indian Subcontinent Fund are largely positioned to benefit from the country’s domestic growth story. The vast majority provide goods and services to local people and, given the size and scale of the country, have ample opportunity to grow domestically, by expanding to new regions and cities.

“In terms of demographics and the size of the opportunity, there are few markets where domestically focused companies are in a more positive position than they are in India,” says Sell.

“The potential of India has been clear throughout my almost three-decade career,” he adds. “This has been unlocked by Modi over the last few years, enabling India to now gain the attention it deserves.

“The global upheaval unleashed by President Trump’s second term will only shine an even more positive light on the country, given the domestic nature of its growth story and limited impact of US trade and tariffs compared with most major economies.”

[1] https://www.ibef.org/industry/infrastructure-sector-india#:~:text=Budget%202024%2D25%3A-,India’s%20infrastructure%20sector%20is%20set%20for%20robust%20growth%2C%20with%20planned,%2C%20railways%2C%20and%20urban%20development.

[2] https://www.statista.com/statistics/263617/gross-domestic-product-gdp-growth-rate-in-india/

Source: Alquity, as of 3rd of April 2025.