Inflation-proof Sectors

I was thoroughly pleased upon reading your cover story in the previous issue about value in Large-Cap stocks. Can you provide insights on the sectors that could help insulate a portfolio from inflation?

- Sourabh Mittal

Editor Responds: We thank you for your kind words of appreciation and are glad to receive such positive feedback. Higher inflation is negative for stocks because it increases input costs (such as raw materials and labour) as well as borrowing costs, which ultimately curtails profit margins. This often leads to a reduction in expectations of future earnings growth thereby, putting downward pressure on stock prices. IT, banking, and pharmaceutical sectors can be good bets to inflation-proof a portfolio. Hope this helps. Keep writing to us!