Ram Ahluwalia favors utilities and financials over bonds as yields rise

Ram Ahluwalia, the CEO of Lumida Wealth, is telling investors to do something that sounds counterintuitive at first: stop buying bonds and start buying stocks that behave like bonds. Specifically, he’s pointing to utilities and financials as the sectors best positioned to absorb the impact of rising long-term yields while still delivering steady returns.

The argument boils down to a simple trade. Bonds are getting cheaper as yields climb, which means their prices are falling. But utilities, which Ahluwalia describes as “bond proxies with low leverage,” offer similar income characteristics without the same degree of pain when rates move against you. Add in the fact that many utilities are now deeply intertwined with AI infrastructure buildout, and you get an asset class that looks like a bond but grows like a tech stock.

Why bonds are losing their shine

Long-term interest rates are facing sustained upward pressure from a cocktail of fiscal forces: government borrowing, onshoring initiatives, and elevated capital expenditure across multiple economies.

Indian 10-year government bond yields, for instance, have climbed to approximately 7.18%, driven by rising oil prices and substantial government borrowing.

He’s characterized current rates as “actually interesting now,” which is a notable shift from the dismissive tone many macro commentators had about yields even a year ago. But “interesting” doesn’t mean he’s rushing back into bonds. Instead, he’s channeling that observation into a broader thesis about where rate-sensitive capital should flow next.

Utilities: the bond proxy that does more

Ahluwalia’s case for utilities rests on two pillars. The first is mechanical: utilities tend to carry lower leverage than other equity sectors, which means they’re less vulnerable to rising borrowing costs. When rates go up, highly leveraged companies feel it immediately through their interest expense. Utilities, by contrast, operate with more manageable debt loads and generate predictable cash flows from regulated or semi-regulated revenue streams.

The second pillar is structural. The AI revolution isn’t just a software story. It’s an energy story. Training large language models and running inference at scale requires enormous amounts of electricity, and that demand is being routed directly through utility companies that own and operate power generation and transmission infrastructure. Ahluwalia sees this combination as making utilities uniquely attractive in the current environment, offering both the income stability of a bond and the upside optionality of a growth sector.

Financials get a boost from the IPO thaw

The other sector Ahluwalia is highlighting is financials. Banks and financial services companies are direct beneficiaries of higher interest rates because their net interest margins expand. They make more money on the spread between what they pay depositors and what they charge borrowers.

But Ahluwalia is pointing to something beyond just the rate spread. He’s noting an uptick in fee income driven by a recovery in capital markets activity, including a resurgence in initial public offerings. After a prolonged drought in IPO activity, deal flow appears to be picking back up, which means more advisory fees, underwriting revenue, and trading volume for the banks that facilitate these transactions.

What this means for portfolio strategy

The broader implication of Ahluwalia’s thesis is a challenge to conventional asset allocation wisdom. With long-term rates under structural upward pressure from fiscal spending, reshoring, and infrastructure investment, bonds may not offer the protection they once did. Ahluwalia’s framework suggests that the protective role in a portfolio should be filled by equities with bond-like characteristics, specifically those with strong cash flows, low leverage, and exposure to secular growth trends.

Ahluwalia’s consistent messaging over recent months suggests he views the structural forces pushing rates higher as durable, not transient. That conviction is shaping a portfolio philosophy that treats equities not as replacements for bonds but as their evolutionary successors in a changed rate regime.

Disclosure: This article was edited by Estefano Gomez. For more information on how we create and review content, see our Editorial Policy.