Moneycontrol
Last Updated : Aug 07, 2018 04:44 PM IST | Source: Moneycontrol.com

Managing Money With Moneycontrol | Here’s how rising interest rates may impact your investment portfolio

To know more on the interest rate hikes, watch the accompanying video.

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In this episode of Managing Money with Moneycontrol, we will tell you how RBI’s decision to hike repo rate by 0.25 per cent impacts your investment portfolio and what is the best approach to fixed income now. Also which are the best funds you look at investing now. In the accompanying video, Saket Soni, CEO, Boulevard Finserv, shares actionable insights on how interest rate will affect your overall investment portfolio.

How do rising interest rates change investors' risk appetite?

We are in a scenario where the global interests are rising, both in developed and emerging markets. We have seen that interest rate in the US is also rising. Now in such a scenario, most investors look at the risk-off trade which means they try to move out their money from equities and look at getting into the debt. This is exactly what we are noticing in India too. We are looking at a higher interest rate scenario, the inflationary pressure is very high. We are in a year where we are going to see many elections. So, we don’t think that interest rate in any way is going to get down. However, the investors will behave the way they want to and the behaviour we are seeing here is of risk-off trade.

How investment in equity-oriented products and fixed income product get impacted?

In equity-oriented products, interest rates play a lot of role in the economy. There are certain sectors like the auto sector, real estate sector or the banking sector where the interest rate plays a big role. So, we don’t think that the auto sector and real estate sector will do well currently. We also see some pressure on the banking sector. Hence, you may notice some negative impact on these sectors. However, we believe that PSU banks might do well. Hence, equity investors should stay away from the sectors which are going to be impacted negatively by rising interest rates. They should today look at the safer bet, let’s say the IT sector. It is doing fairly well and also fairly insulated from any kind of interest rates hike. We believe that some of the consumption stories and retail stories are also doing well. So investors can look at being in these sectors.
First Published on Aug 7, 2018 04:44 pm
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