Bullish On Private Banks, Cautious On Industrials: UTI's Vetri Subramaniam

Banking and financial space, particularly private banks have "absolute return opportunity" going ahead, while caution looms over industrial companies, according to Vetri Subramaniam, chief investment officer at UTI Asset Management Co.

“Banking and financial services is where we have the maximum comfort,” Subramaniam told NDTV Profit in an interview. While acknowledging challenges in the sector, like slowing credit growth, he noted that valuations in private banks provide attractive opportunities.

“These private banks are well-placed in terms of capital adequacy and their ability to absorb credit costs. Their incremental market share in deposits and loans makes them a compelling absolute return opportunity over a three-year basis,” he said.

However, Subramaniam urged caution in industrials. “Valuations are very rich, and it’s hard to justify expectations of sustained high teen or above 20% corporate profit growth in an economy with nominal growth below 10%,” he said.

On the IT sector, he remarked, while structurally positive due to expected spending increases post-Trump taking over, valuations leave little room for significant gains.

Subramaniam advised investors to prioritise asset allocation and risk management. “Given current valuations, it makes sense to explore hybrid schemes rather than going all-in on equities. Fixed income also offers reasonable opportunities,” he said.

Reflecting on market uncertainties, he emphasised the importance of spreading investments over asset classes. “Investing is about probabilities and navigating uncertainty. Volatility is intrinsic to equity markets. Instead of fighting it, use it to your advantage through systematic investment plans,” he said.

On investment factors like momentum, low volatility, quality, and value, Subramaniam noted their long-term alpha generation potential. “Discipline is crucial. Pick a factor and stick with it through all cycles,” he advised.