Global tariff war may weigh on valuations: UTI AMC's Subramaniam

The economy has slowed in recent quarters, which is now visible in revenue and earnings trends Vetri Subramaniam Chief investment officer, UTI AMC

- Ram Sahgal

Earnings downgrades of India Inc. continue amid slowing economic growth domestically and global trade uncertainty, but UTI AMC's chief investment officer sees an improvement for Nifty 50 earnings in the next fiscal year from the mid-single digit consensus forecast for FY25. Vetri Subramaniam cautions, though, that his expectations are tempered by economic growth running at a nominal 10% and limited scope for margin expansion.

Hybrid funds like Balanced Advantage Fund and Multi Asset Allocation Fund should be the investor's top choice for navigating turbulent market conditions. Global trade uncertainty fallout can't be ascertained on market earnings currently but could weigh on valuations, he thinks. Edited excerpts:

How have your equity funds' NAVs performed in the Oct-Jan period of the correction in broad indices like the Nifty 500 and a bear market in smalls and midcaps (Smids)?

Our equity funds have navigated the drawdown and increased volatility in the equity markets quite well relative to their respective benchmark indices. Our investment process emphasizes operating cash flows and return on capital ratios. From a valuation perspective, we have been concerned that the markets were overestimating sustainable growth for many businesses and many stocks were backed only by narratives without fundamental support. This caution has worked to our advantage during this selloff.

Corporate earnings in Q3 saw slower revenue growth for Nifty 50 and Nifty 500 companies, but lower input costs aided Ebitda. Also, there seems to be an improvement in government spending. Do you expect an improvement in FY26 over FY25 in terms of both economic growth and earnings, given the ambient global tariff tensions?