3 min read Last updated: October 9, 2024 | 11:04 AM IST
The Reserve Bank of India (RBI) on Wednesday decided to keep the repo rate unchanged for the 10th consecutive time, signaling a critical period in the interest rate cycle. The shift from an accommodative stance to a neutral stance indicates that the RBI may be nearing the peak of interest rate adjustments, creating an opportunity for Fixed Deposit (FD) investors to secure higher returns. It becomes.
For those considering fixed deposits, the current situation presents a unique opportunity. By locking up your deposit now, you can ensure that you receive the best possible return over the long term.
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“For those holding fixed deposits (FDs), now is a good time to lock in high interest rates as interest rates are expected to come down in the coming months. However, these high FD rates could soon start narrowing as central banks brace for future rate cuts based on inflation data and changing economic conditions. there is. You can protect your savings from future interest rate cuts and get the best possible returns in the long run,” said Adhil Shetty, CEO, Bankbazaar.
By locking in a higher interest rate than you currently have, you can protect your income and maintain financial security even if interest rate trends change. Potential rate cuts are expected in December 2024 and February 2025, and acting now can take advantage of favorable conditions.
What should investors do?
Consider investing in short- to medium-term term deposits to take advantage of the current high interest rates. This is especially beneficial if you anticipate a potential rate cut in the near future.
Ladder FD: Create a ladder FD strategy by investing in fixed deposits of varying maturities. This spreads your risk and potentially allows you to benefit from future interest rate changes.
However, you should allocate only a small portion of your portfolio to fixed deposits. Since all FDs are taxed according to the tax schedule, investors should not be tempted to allocate a higher percentage of their assets to fixed income instruments just because of higher interest rates. Additionally, term deposits can be canceled early, but there are often penalties.
consider bonds
“In this context, long-term bonds at current yields look attractive, especially if global tensions ease and domestic economic indicators remain stable,” said Suresh Dharak, founder of Bondbazaar. “Investors may want to consider locking in long-term bonds.”
First publication date: October 9, 2024 | 11:04 AM IST
