“It is a combination of three factors, all related to FIIs,” Subramaniam told ET Now. First, passive money is flowing out of emerging market and India-specific ETFs. Because banks make up nearly 30–35% of the index, passive fund managers have no choice but to sell. Second, risk-off sentiment toward India is fuelling heavy short positions in Bank Nifty futures. Third, FIIs are actively building negative positions in individual bank stock futures — a technical but potent form of pressure.
Compounding the problem: Domestic Institutional Investors (DIIs) are sitting on the sidelines. Having stocked up heavily on banking names over the last 18 months, they lack the appetite to absorb what FIIs are offloading. “This lack of support from DIIs and this diverse range of FII selling — that is the crux,” Subramaniam said.
“Oil is an extremely V-shaped phenomenon. It falls sharply, rises sharply. When all the dust settles, prices come back”
A stronger dollar and a softening rupee are adding to the headwinds. India’s 85% dependence on oil imports makes it uniquely sensitive to crude price swings, and algorithmic trading systems are programmed to sell India when oil-related triggers fire. “Banks are 30–35% of the index — they bear the brunt every time,” he noted.
Should you buy the dip?
Subramaniam’s advice: nibble, don’t plunge. He recommends deploying roughly 1% of free cash flow into markets every day, effectively spreading your entry over 100 days, or roughly three months, which he believes marks the outer limit of the current geopolitical crisis‘s market impact.
“I see that in a three-month timeframe the war will get settled one way or the other,” he said. “Political pressure on all sides, on Mr Trump from domestic gas prices, on Israel, on Iran, is simply too great for this to drag on.”
His strategy: Rebuild positions proportional to what you held before the current Iran-Israel-US tensions escalated. “India’s long-term growth story has not changed. This is a good way of averaging out your portfolio.”
ETMarkets.comFor risk-tolerant investors, Subramaniam sees opportunity in sectors battered by oil fears — airlines like IndiGo included. “This is an extremely panic reaction to a deep geopolitical event that will not last forever,” he said, adding that IndiGo and peers are already moving to protect margins through fuel surcharges.
Consumption, particularly consumer durables and white goods, is his pick for moderate investors. The GST cut is a real structural tailwind, he argues, and the summer cooling season is set to drive strong volume growth. Near-term margins may face pressure from input costs, but operating leverage means topline beats will translate strongly to earnings.
On the emerging AI and data centre theme, Subramaniam identifies two indirect plays for Indian equity investors: IT services companies, which have the domain expertise to execute data centre buildouts (even if they face near-term AI headwinds), and power sector financiers like REC, which are beginning to look “very attractive” as the massive energy demands of AI infrastructure become clear.
Auto OEMs and ancillaries, however, get a wait-and-watch rating — the pause on trade deals with the US has introduced too much uncertainty to take a decisive call.