Banks will be the sector for the year, predicts Carnelian Assets' Vikas Khemani

Vikas Khemani, Founder of Carnelian Asset Advisors

After last year's underperformance, Vikas Khemani, Founder of Carnelian Asset Advisors believes that banks will emerge as the sector that will outperform in 2025. His bullish stance on banks is  driven by a shift in the Reserve Bank of India’s (RBI) accommodative stance on growth. Khemani believes that the combination of attractive valuations, improved liquidity conditions, and a policy push toward economic expansion will make banks and Non-Banking Financial Companies (NBFCs) a winning bet for investors in 2025.

Khemani shared these views as part of a panel discussion on " The great 2025 market hunt: Timing, trends and alpha plays" at Moneycontrol's Global Wealth Summit 2025 that took place in Mumbai today.

According to him, banks need to perform well for the broader economy to thrive. “For any economy to do well, banks need to do well. Going forward, banking can be a big sectoral winner,” Khemani stated.

He emphasised that three key policy moves—the RBI’s liquidity push, reduction in risk weights for NBFCs, and interest rate cuts, that indicate a clear shift toward supporting growth. This policy-driven momentum is expected to attract more capital into banks and deposits, alleviating the liquidity crunch that financial institutions have faced over the past two years, he believes.

Catch highlights of Moneycontrol's Global Wealth Summit

Khemani also expects this to lead to stronger earnings growth in the coming quarters, with corporate earnings likely to pick up within the next one to two quarters.

Despite underperforming last year, the banking sector, including NBFCs, is now seen as an attractive investment opportunity. "Valuations at a very very attractive level, several PSU banks are trading at 0.6-0.7 times their books, so healthy correction has also happened here. After last year's underperformance, many NBFCs are also attractively priced," Khemani said.

Khemani also addressed broader market concerns, acknowledging that corrections are a natural part of market cycles. He drew parallels to the downturn during the Ukraine war, highlighting that similar geopolitical uncertainties have once again jumped back into the limelight.

However, he advised long-term investors to remain patient, noting that India remains a structural bull market. “If you didn’t sell back then, there’s no point selling now,” he remarked. With the RBI actively working to ease liquidity constraints and support economic expansion, the Indian banking sector appears well-positioned for a strong rebound. As policy tailwinds continue to drive growth, he believe investors should stay the course and capitalise on the sector’s long-term potential.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.