Vaibhav Sanghavi, Co-CEO at Avendus Capital Alternate Strategies expects US Federal Reserve to hike rates in 2023. In its Federal Open Market Committee Meeting last Wednesday, The Federal Reserve signalled it may increase interest rates sooner than previously thought amid a strong growth rebound in the US economy and rising concerns over inflation.

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Talking to CNBC-TV18 Sanghavi said, “In spite of so-called ‘hawkish’ Fed, clearly it seems that 2023 rate hikes are something which it suggests. In that scenario, earlier markets started kind of rallying, the narrative was that there is easy liquidity and a huge amount of quantitative easing program and the interest rates fell over because of which the risk kind of goes down in owing equities and equities had a valuation premium.”

He added, “Now we are likely to see interest rates kind of inch up going forward and a talk of tapering during the later end of the year the narrative is likely to shift towards that all this is happening clearly because the economy is growing very well, corporate earnings are going to be pretty robust, asset classes like commodities will continue to do well. So what I see is basically a distinct change in narrative from low-interest rate, high liquidity to robust economic growth and corporate earnings.”

On portfolio recommendations, Sanghavi said, “We are likely to get our exposures to a sector like industrials, materials, to an extent financials as well. In pro-cyclical or pro inflationary environment, these are the sectors which can probably do well going forward.”

On metals, he said the prices are likely to remain robust, at least in the medium term. He said there are two major reasons for this. "One is economic growth that is kicking about. Two, as economies keep opening, people want to travel more and spend more and the governments are actually trying to address the supply side by incentivising”

“My sense is basically the prices of metals and commodities are likely to remain robust at least in the medium term,” he added.

For full interview, watch the accompanying video.

(Edited by : Yashi Gupta)