On February 7, following the bi-annual monetary policy meet, the Reserve Bank of India (RBI) announced 25 basis points cut in repo rate to 6.25 percent. It is common understanding that the repo rate cut would mean cheaper loans but it will take a while before the changes are reflected in the lending rates by banks.
Similarly, banks will also start reducing the interest rates offered on deposits made to them. So, if you are a risk-averse investor waiting for the right time to put your money in a fixed income instrument, you shouldn’t wait longer.
Financial experts have suggested that the surprise rate cut by RBI would mean that it is unlikely that the rate would go up any time soon. Also, considering the low level of inflation and prevailing currency volatility, the interest rate may not fall further as well.
If you do plan on investing in debt mutual funds, fixed deposits or bonds, you should act on it as soon as possible to avoid missing out on the current rates.
Other experts feel that the gap between deposit rate and bank credit growth is likely to make private banks offer higher rates to mobilize deposits. They advice on investing in FD right now but for tenures as long as 1 to 2 years only.
Ultimately, an investment decision should be based on your risk appetite and financial goals rather than on future expectations of an interest rate hike. Invest wisely.
This story has not been edited by Topic Hunt (with the possible exception of the headline) and has been generated from a syndicated feed. (GoodReturns)