In this episode of ‘Investment Guide’, Madhu Kela, founder of MK Ventures, shares his views on how to build a portfolio to play the cyclical economic upturn.

What are the key indicators and signs of the big cyclical upturn?

Kela said, “I think there are clear signs that the economy is in the cusp of revival. Government policies for the last 24 months have been very supportive, we have seen a number of reforms, specifically on the supply side, come from the government."

"We are seeing indications of improvement in the quarterly numbers where we can see the volume growth across the sectors which positively impact the economy. Also we have enormous amount of liquidity, both globally and locally, and the interest rates which I have never seen in my career."

"I am not saying that they will last forever, but I have not seen corporates borrow money at 3.5-4 percent even in the short term. So, all of this is clearly indicating that the cyclical upturn in the economy has begun and I would say there is still a long way for this to go.”

Is the second wave of COVID a threat to the cyclical upturn?

“What we have to realise about the second wave is that it is very different than the first wave. When we went into the first wave, there was panic all around because we did not have a vaccine, we did not have a cure for COVID. Today things are different. Obviously to some extent it will impact the economic revival, but I don’t think it will derail it or it will have a significant impact as it did in the first phase,” he said.

What portfolio positioning should one have in an upturn?

“This has to be a combination of all sectors which positively impact the economy. So, your portfolio construction would have to include companies from infrastructure, companies from real estate, companies from PSU basket, and more specifically the public sector banks,” Kela said.

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(Edited by : Bivekananda Biswas)