How to build an inflation-proof portfolio? Sraboni Haralalka explains

Her 26 year-long stint in dealing and interacting with UHNIs (Ultra-high-net-worth individuals) as well as promoter families prompted her to co-found Wodehouse Capital Advisors Pvt Ltd, a premier mid-market focussed investment bank, helping clients with Mergers & Acquisitions, Capital Syndication services, Strategic Consulting and Multi-Family Office services. An alumnus of Kolkata's La Martiniere School and Presidency College, she ensures that her organisation stands out in terms of its deep domain expertise, professional hands-on approach and a 'client-centered' process ensuring thereby consistently outstanding results.Speaking to BizzBuzz exclusively, Sraboni Haralalka, Executive Director and Co-founder, Wodehouse Capital Advisors Pvt Ltd, explains why inflation is the most critical economic consideration in today's context- globally and in India as well. She also prescribes some way-outs

Being at the helm of a premier mid-market focussed investment bank, what do you think is the most commonly used term in the world of economy and business and beyond, now that the pandemic is nearly over?

I think inflation has been the second most commonly used term after 'pandemic' in the last one year. Following the pandemic-led economic stimuli, subsequent downturn and slow revival, we are once again back to discussing the descending pressure on growth. Governments across the world are scrambling to find ways of reigning in this multi headed monster.Mind you that, it just toppled a prime minister in the UK and caused the mighty dollar to lose some steam.

What about in India? How critical or serious is the problem in India?

India however is no stranger to this tiger. Inflation has been a permanent fixture of all economic discussions and budgets and the central bank and government are well versed in managing growth in spite of inflationary pressures. What is not understood too well is how this affects the common man. In August 2022, the rate of inflation in the country was at 7 per cent for Consumer Price Index (CPI) and 12.41 per cent for Wholesale Price Index (WPI). The last three years have seen soaring inflation rates much above RBI's upper limit of 6 per cent. And this has been the case for the past many years. For example, a loaf of bread that cost Rs 10 in 2000 is now Rs 50. Salaries haven't however, gone up as rapidly. On the other hand, a fixed deposit, the go to safety net for most middle-class households, rarely give returns of more than 5 per cent. Your money therefore isn't growing as rapidly as the cost of household items.

And, one also has to remember that India has been a price sensitive country, generally…

Yes, you are right. The pandemic created significant disruptions in supply-chain, the repercussions of which are still prevalent in the country, fuelling the flames of inflation. This disruption has subsequently led to a hike in prices of commodities and fuel which is reflected at all levels, including transportation and logistics costs. While consumers are often at the forefront bearing the brunt, small and medium businesses are no less; which has put India in a tight spot given that we are a price-sensitive nation.

So, what needs to be done?

The markets are now crashing and there is an overall dip in revenues. However, it is crucial to be vigilant and effectively manage assets to reduce the tides of inflation and an upcoming recession, and thereby an overall dip in valuation. So let me reiterate that managing assets effectively is going to be crucial in the days to come.

What is the best hedge against inflation?

The best hedge against inflation remains equities.Just to give you an example, our call at Wodehouse, since the end of last year has been to book profits in the equity portfolios and park those funds in expectation of exactly these times. We expect the recessionary pressures in the economy, given the current global scenario and markets to be range bound with downward bias in the next two to three years. This is the time, keeping in mind risk appetite, age and time horizon that one must take exposure, over a period of time to good quality equity.

Some stocks in the market may suddenly witness tremendous growth within a short period of time. While it might be tempting to invest in such stocks and cash in on the market gains, these involve high-risk, and one untimely move can result in heavy losses. Disciplined investing in good companies will ensure healthy, long term returns.

You mentioned sometime back that life is a balance between holding on and letting go. Could you please explain that?

See, asset allocation is the bible we follow at Wodehouse. Depending on one's risk appetite, liquidity requirements, age and time horizon we advise our clients to diversify across asset classes and within them across multiple instruments, investment dates and fund managers. Balance is the most important attribute, as in everything in life. It is always a good idea to diversify your assets portfolio, with classes that usually have low or negative correlations. This means that even if the value of one asset falls, the other assets would still be able to counteract it.

Can global investments be an option?

Yes, I think that global investments may be an option.Today, several financial service providers offer products and services that enable access to international stock markets. This is a good hedge against our devaluing currency over a long period of time as well as against possible country risk. Currently however, India is far better positioned than most economies and one must take these calls very carefully. There are interesting options like SLS (Senior living settlements)investments that provide 7-8 per cent dollar returns with no downside. Expanding your assets portfolio through investments in global markets can help increase the valuation of your assets, based on the currency values. This will not only expand your investment horizons, but could help build a global network.