'Cheap valuations make economy-sensitive stocks a good bet'

The RBI’s decision to increase the policy rate will harden the rates in the economy and tighten the money markets but will make investors confident of the long-term prospects of India, said Chandresh Nigam, MD & CEO Axis Mutual Fund.

The RBI wants to convey the message that the country has macroeconomic stability, he said.

The RBI had on 20 September increased its repo rate by 25 basis points to 7.5 percent and cut marginal standing facility rate by 75 basis points, raising concerns that without appropriate policy measures there will be an upward spiral in inflation.

The move has been widely criticised by the industry as they fear a further increase in borrowing costs will result in a further slowdown.

Nigam is also of the opinion that economy sensitive sectors in the stock market are now looking very cheap.

“The big opportunity which is now looking very cheap in the market is the economy sensitive sector, be it banking space, real estate space, infrastructure space, and capital good,” he told Firspost in an interview.

“These sectors have been very badly beaten down, stocks has lost anywhere between 30-90 percent of their value. Now if the economy is to improve in the medium term over the next 18-24 month many of these companies, many of these sectors will look interesting,” he said.

He also said diversification across geographies is a good strategy now.

“Diversification and risk mitigation has always been a thing amongst asset managers. Hitherto, we have been talking about, asset allocation within the India geography. I think it is very relevant in this new interconnected world that all our eggs should not be in the basket of one country. There may be opportunities elsewhere; I think there is a very good case for diversification across the geographies, in different economic areas,” he said.

Nigam also shared his views on investors concerns in the current market scenario, and investing strategies for those in their 30s, 40s and 50s.

Watch the full interview above.