Banking, financials remain strong play despite near-term volatility: Sunil Subramaniam

Crude oil’s sustained elevation continues to weigh on market sentiment, with concerns building around whether higher oil prices are effectively placing a ceiling on Indian equities. The discussion also touched upon the evolving UAE–OPEC+ dynamic and its potential medium-term implications for global supply.

UAE-OPEC+ shift and oil supply outlook
Market expert, Sunil Subramaniam highlighted that the current UAE situation is unlikely to result in any immediate increase in global oil supply, but could have deeper structural implications over time.He explained the logistical and geopolitical complexities shaping the region:

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“See, what is the situation there is because UAE depends on the Hormuz Strait and it is heavy crude, and Saudi Arabia, which has the alternative route, has lighter crude. And anyway, UAE is not getting along with Saudi Arabia in terms of the relationship from a crude perspective. They have spent $150 billion on expanding capacity to five billion barrels, and now they are limiting them to three. So clearly UAE feels the heat.”
He further added that political positioning is also playing a role in the evolving dynamics:
“Politically, UAE wants to be aggressor in this war, but Saudi Arabia wants to be on the peace side. So it looks like UAE and the US are aligning closer to each other.”
According to him, the broader implication is a potential weakening of OPEC’s bargaining power:

“About 15% of OPEC production is UAE; that goes away, OPEC’s bargaining power comes down.”

Medium-term crude outlook and implications for India
Subramaniam noted that while short-term oil prices remain driven by geopolitical tensions—particularly disruptions linked to the Hormuz Strait—the medium-term trajectory could be more favourable.

He outlined a scenario-based outlook for oil prices:

“In about two to three months after the war, the oil price would settle at about $80 to $85. But now with this happening and UAE likely to pump another one to one-and-a-half million barrels into it, and the demand destruction because of war, in the medium term I see oil again retracing to 70.”

He emphasised that this would be a meaningful positive for India’s macroeconomic stability:

“If oil comes back to 70, it is a huge relief for India’s fiscal deficit and everything. From that point of view, this removes one cloud on India’s future.”

However, he cautioned that markets may not react immediately:

“In the short run, it is the war which is dominating, so do not expect any immediate reaction. That is why Brent has not reacted.”

Banking, financials show resilience
On the domestic financial sector, Subramaniam refrained from commenting on specific stocks but pointed to broader strength within the lending ecosystem.

He observed that rural demand and auto-linked credit trends remain supportive:

“The lending pack started off with the I bank results in terms of the fact that rural demand and auto demand both have held up strongly, and that connection between rural and auto is naturally played through lenders because of EMI-based purchasing.”

He added that asset quality remains broadly stable across the system, while also highlighting strength in non-lending financial businesses:

“Asset management companies have also come out with good results and the penetration story continues to play out.”

On PSU banks, he struck a more cautious near-term tone while maintaining a constructive medium-term view:

“Medium term my outlook on public sector banks is positive but short term I see some pressure because of the need to book profits.”

Pharma opportunity: Semaglutide and beyond
Turning to the pharmaceutical sector, Subramaniam underscored the growing global opportunity in semaglutide-based drugs, particularly as patents near expiry and generic competition expands.

He described the development as structurally significant:

“Absolutely. Semaglutides were originally a diabetic drug. India is already the diabetic capital of the world. But as a weight loss drug, it opens a much wider market.”

He pointed to strong demand potential in developed markets: “It is a huge opportunity in the Western world with unhealthy food habits. It is kind of explosive.”

On pricing dynamics and generics, he added: “They can retain very good profit margins but sell the product at 25% of what the branded drug costs. It is a game-breaking opportunity.”

Outlook
Overall, the commentary suggests that while crude oil volatility continues to dominate near-term market sentiment, the medium-term outlook may tilt more favourably for India—particularly if oil stabilises at lower levels. At the same time, financials and select pharmaceutical segments appear to be emerging as key structural themes in the evolving market landscape.