“They are now a lot more comfortable that the system has been cleaned up… that is good for the banks, along with the easy liquidity,” he said.
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While credit growth is still subdued — tracking nominal GDP at around 9% — Subramaniam believes the trendline is likely to turn higher as the policy stance continues to favour expansion. He sees this as a positive setup for the financial sector, which remains one of his preferred areas of the market.Subramaniam is more cautious on broader equity valuations. He believes investors should temper their expectations, given that the benchmark indices are not cheap, and earnings risks remain, especially in a more uncertain global environment. “I would suggest that the main thing is for investors to have very moderate expectations from equities, given the current starting point in terms of valuations,” he said.
On the global front, he pointed to a growing divergence between asset classes in the US. While bond markets are pricing in two rate cuts by the Federal Reserve this year — implying weaker economic data ahead — US equity markets are seeing strong outperformance from cyclical stocks over defensives. “Only one of these thesis is going to play out. Both can’t play out,” Subramaniam said.
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Domestically, he is more selective in his sectoral bets. While the market has turned its attention to mid- and small-cap stocks on expectations of stronger earnings growth, he remains cautious due to high starting valuations. He prefers to balance growth visibility with reasonable valuations rather than chase one theme in isolation.
Apart from financials, Subramaniam sees potential in the healthcare space, which he says is now broadly diversified across domestic pharma, global contract players, diagnostics, and hospitals. He is less enthused about fast-moving consumer goods (FMCG) stocks, where valuations still leave little room for comfort despite recent underperformance.
