How to fortify your portfolio against rising inflation? Dilip Bhat explains

“Coming to the event, a lot of it has been factored in and the market is always in a mood to look at it very optimistically. A 50 bps hike is not going to shock the people,” says Dilip Bhat, Joint MD, Prabhudas Lilladher.

The era of easy money is winding down. Tomorrow is a big day for the RBI MPC. The market has already factored in a rate hike. How big an event or a non event will tomorrow be?
I think with the easy money policy behind us, the market is wondering how to respond to it and we have seen a lot of bearish sentiments playing out. Of course, one of the reasons was that the stocks were certainly on the expensive side of the valuations, but at the moment, we do not know whether those valuations were right or the valuations are at all realistic. That challenge will continue for all of us as we proceed further.

Coming to the event, a lot of it has been factored in and the market is always in a mood to look at it very optimistically. A 50 bps hike is not going to shock the people but yes more than that 50 bps will.


Also important is the statements the apex bank will be making on inflation, how it will pan out and whether they see the easing of inflation very quickly. Some of those things will be looked upon very closely. How the economy is moving, whether the heating up of the economy is done, whether some of those parameters are falling in place or not is something which everyone would like to hear and interpret going forward.

How can we fortify our portfolio against rising inflation – what kind of stocks, what kind of sectors?
From the current levels, it will be very important to see how this inflation is ultimately going to be tamed and whether it is going to be at the expense of the growth of the economy which is always a challenge for the RBI. It has to see how the growth need not be compromised and how to tame the inflation.

Looking at the overall scenario in the portfolio, I would say that it would be better to stick to some of the consumer names and some of the banks at the moment because all of these sectors have taken a hit on their chin and some appear to be getting to pretty attractive levels from the way they are reacting. So, overall, maybe the FMCG sector, the consumer discretionary and banking.

As the rural income gets more consolidated and as the agri prices continue to rule firm, what was one of the biggest pains in the economy is where the recovery is also going to be seen. So maybe something like two-wheelers also possibly could be on the radar after taking a back seat for quite some time; maybe something like tractors. Some of those sectors should be on watch for the long term.