Why Vetri Subramaniam thinks financials stocks are in a sweet spot

Vetri Subramaniam, Chief Investment Officer at UTI Asset Management Company, said financials companies are currently well-positioned to support economic growth without needing fresh equity capital.

With balance sheets in strong shape and liquidity improving, banks are poised for a period of self-sustained growth.

“Many of the financials companies will be able to grow without diluting… it’s very self-sustaining in terms of the outcomes that you can experience as an investor,” Subramaniam explained.

Credit growth, which had slowed due to tight monetary and fiscal policy, is now expected to rebound. Subramaniam believes we could see system-wide credit expansion of 13–14%, up from the current 11%, as the Reserve Bank of India (RBI) shifts towards a more growth-supportive stance.

However, he flagged potential challenges on the earnings front. With 2025-26 (FY26) Nifty consensus earnings growth estimated at 13–14%, Subramaniam cautioned that “in an environment of uncertainty… there is a scope for things to slow down.” This could weigh on market multiples.

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The persistent overhang of global uncertainty, especially around trade dynamics and policy clarity, could continue to impact business confidence and investment decisions. While India’s direct exposure to exports remains modest at 2% of gross domestic product (GDP), he warned that second-order effects like demand diversion and dumping could pose risks and opportunities.

Subramaniam remains constructive but selective in the power sector. While growth in demand and complexity in energy sourcing opens opportunities in areas like transmission, he emphasised, “it is a utility business… returns are regulated,” calling for valuation discipline.

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While flows from foreign portfolio investors (FPIs) have supported market momentum recently, Subramaniam stated the importance of long-term capital: “The outlook for capital flows into emerging markets (EM) and into India will improve… I mean, even eventually foreign direct investment (FDI) money, which I think is really very, very important to the country’s long-term growth trajectory.”

As of March 31, 2025, the total assets under management (AUM) stood at $161.29 billion.

For the entire interview, watch the accompanying video

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