$40 billion fund manager sees clear case for medium-term outperformance in this sector

"Financials and the big banks is one of the few areas of the market where we think there is a very clear case for absolute positive performance relative to the benchmark over the medium term," says Vetri Subramaniam, Chief Investment Officer at UTI Mutual Fund, which manages $40 billion in funds.

Gautam Shah of Goldilocks echoed Vetri Subramaniam's bullish view on the banking sector in an interview earlier today.

Shah highlighted the Bank Nifty's resilience over the past six weeks even as the Nifty corrected by 10%. "There's a clear message from the market that banking is an outperformer and is likely to do well," he said.

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Shah expects a breakout in the Bank Nifty above 52,500 soon, which he believes could pave the way for new highs at a faster pace than the Nifty, with a target of 55,000 for the Bank Nifty.

The Bank Nifty has gained 9% versus Nifty 50 gains of 12% so far this year.

Subramaniam struck a cautious note on the broader market, warning that returns could be muted in 2025 as markets have already priced in significant gains.

"Equity market performance has been way ahead of earnings growth. There's been significant P/E multiple expansion, and some of that amounts to bringing future returns into the present," he said.

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Subramaniam said the outflow of foreign institutional investor (FII) funds was primarily due to the attractiveness of US bond yields and India's relatively high valuations compared to other emerging markets.

Most foreign investors, he says, understand the long-term structural case for India but just want a better entry opportunity.