High-beta stocks may outperform
For the same reason, the retail demand in other rate sensitive sectors such as realty and automobiles too may get a boost. However, that may be dependent on the pass-through that a retail consumer may gain from the rate reversion.
However, the question that how these sectors playout in the equities market; is altogether different. For one, the FII-led liquidity flow continues to remain a key determinant for the market. To add to that, the valuation levels, the business prospects and the management efficacy too need to be assessed.
This therefore does not necessarily imply that the ‘defensive’ sectors such as healthcare may underperform the market. However, the weightage for underlying fundamentals would become increasingly important from the investment point of view and therefore a case-to-case assessment may be needed.
Thus, if history is any indicator: were the economy to do well, high-beta sectors might outperform the larger market. But then, while the history may repeat itself, it is never the same.
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