Pre-pandemic ultra-low rates may not return; how to invest in an elevated rate regime? Here's what experts say

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Modi 3.0: As Nirmala Sitharaman back on FM's chair, share market pundits bet on…Experts say it is almost evident that the ultra-low rate regime of the pre-pandemic era may not return. What should be the investment strategy during an elevated rate regime?Mint consulted experts for their insights on investment strategies during an elevated rate regime. Here’s what they shared:Hajra said in a high-interest-rate environment, a greater allocation to fixed income over equity assets is advisable.

Within equities, value investing appears more attractive than growth investing. Defensive and less interest-sensitive sectors should be preferred over more interest-sensitive ones.However, Hajra observed that these asset and sector preferences may not yield superior returns compared to benchmarks. If investors have anticipated higher future inflation and interest rates, value and defensive sectors might not outperform growth and aggressive sectors.

Moreover, the expectation of prolonged higher inflation and interest rates is not guaranteed. Factors such as slower economic growth, rising unemployment, positive supply-side shocks, and technological progress could reduce inflation and interest rates faster than currently expected, he said.Also Read: Nifty 50 hits a fresh record high: Can it touch 24,000 before the Union Budget 2024?"We advise investors to adopt a long-term strategic approach to investment management. Numerous studies indicate that over the long term, more than 90 per cent of portfolio return variability is determined by asset allocation decisions.