In high rates scenario, look for defensive bets

The Reserve Bank of India, in its monetary policy announced on May 3, raised the repo rate by 50 basis points to 7.25% and savings bank rate to 4% from 3.5%. With inflation and crude oil prices staying high, the central bank had little choice but to raise the rates. Soon after the rate hikes were announced, the markets went into a downward spiral. The Sensex lost as much as 617 points in the last week. Interest rate-sensitive sectors like banks, automobiles, real estate, construction and infrastructure fell much more. In response to the RBI policy, banks have raised base rates since their cost of funds has gone up. This would increase the borrowing costs for corporates, hitting their profitability. Market experts also worry that this may hamper growth in the near future. In such a scenario, what should the retail investors do with their portfolio?