Uday Kotak warns investors about quantitative easing, heed his advice

 

Uday Kotak talks about 'gravity' and cautions risk-on investors.

A contractionary monetary policy tool known as quantitative tightening (QT) is used by central banks to reduce the amount of liquidity or money supply in the economy. The US Federal Reserve is expected to continue extending QT until the end of mid-2023. Meanwhile, Uday Kotak cautioned investors against risk aversion regarding the current economic situation.

The CEO of Kotak Mahindra Bank talked about "gravity" in his most recent Twitter post. Give high rates, gravity comes back. Every risk investor should be mindful of the power of gravity, tweeted the billionaire banker.

Gravity! When interest rates are low and central banks are busy printing money, equities can defy gravity. When money gets tight (QT) and deposits pay higher rates, gravity returns. Every venture investor should be mindful of the power of gravity.

— Uday Kotak (@udaykotak) December 21, 2022

"Totally agree! The risk-reward is currently skewed towards bonds. Bond yields exceed the S&P500's earnings yield after a very long time, and real returns across the curve are +ve. A material shift from equities to bonds?" wrote a user.

“Why can't deposits and equity.. both go up!! I'm sure, we have a lot of potential retail investors waiting...to jump into the world of investing," wrote another.


Kotak first stressed the need to achieve scale in manufacturing based on cutting edge product innovation and development of IP rights rather than relying solely on arbitrage to secure a profit to create world-class Indian enterprises.

Kotak had earlier said during an interview in December that it was the "Cinderella time of the Indian banking sector". According to him, it was "the sweetest credit cycle" he has seen in many years.

"The question is, what time of day is it in Cinderella's time? I still think it's noon, early evening. So now midnight is far away. But, at some point, the clock strikes midnight. So We need to be prepared for this. I think this is a good time to underwrite well and grow the economy," Kotak told The Economic Times.