Stories
Stay Underweight on Banks and Insurance, Says Enam Holdings Sridhar Sivaram
- •Sridhar Sivaram of Enam Holdings advises investors to remain underweight on banks and insurance, favoring NBFCs and manufacturing instead.
- •Competition from public sector banks has become structural rather than cyclical, eroding the profit pool and technology advantage of private banks.
- •The insurance sector faces headwinds due to its heavy reliance on savings products and potential regulatory changes affecting tax incentives.
- •Manufacturing remains a strong long-term growth theme spanning pharmaceuticals, power equipment, and precision engineering.
- •Sivaram urges institutional investors to maintain pricing discipline regarding demanding valuations in the current IPO market.
Key Questions Answered
Sridhar Sivaram remains underweight on banks because competition from public sector banks has become structural, as they have narrowed the technology gap with private lenders and are gaining retail lending market share. He also notes that intense competition in retail lending has led private lenders to lose market share in home and auto loans.
Sivaram remains cautious and bearish on insurance because the sector's business model relies heavily on selling savings products instead of protection. He believes that regulatory reforms, potential changes to tax incentives on products like ULIPs, and the proposed Bima Sugam platform could weigh on medium-term distribution economics and growth.
Sivaram favors non-banking financial companies (NBFCs) and housing finance companies, where valuations are more reasonable and growth remains healthy. Additionally, he highlights manufacturing as a long-term growth theme spanning across pharmaceuticals, power equipment, and precision engineering.
