keep on locked in FDs as rates increase
The wave of rate hikes by the RBI has made loans more expensive, but after the last cycle tighten around gross fixed deposits could reach 9% for a period of one year. Previously, the maximum I could get was 8.25% for a similar period.
TOI financial planners talked about the fact that investors now should be the strategy of blocking continued their money into products that have a specific system, such as the number of plans (FMPs) and fixed term deposits (little) performance company’s interests.
“PAF remains attractive because it does not assume the risk of interest rates,” said Suresh Sadagopan, a certified financial planner, financial Ladder7 notice. “Investors need to lock your money in fixed income and FAP are always a good bet because it taxes more efficiently,” said Abhinav Angirish founder investonline.in, an investment advisory committee.
Investors should also look at the ultra short-term funds, industry representatives said. “Investors with a one year horizon should consider funds from current income and those with a shorter time horizon may look liquid funds and short duration.”
However, it would be better to stay away from instruments that have mark-to-market risk, experts say. Fixed-income categories, which invests primarily in government securities will decline in the near future while yields hardened.
10-year government bond yield rose 8.44% to 0.15%, the highest growth in the month of April last year. Bond yields and bond prices are inversely proportional.
A higher interest rate will be lower bond rates on the yields of fixed income categories that have a high exposure to these instruments.
While rate increases have fixed an attractive option, investors should avoid actions, observers say. “Despite adverse conditions, the markets have remained firm quite well. Investors continue to be patient to win.”
Stocks sensitive to interest rates, such as banking, real estate and automotive industries will be affected and should be avoided for the time bein. “Bank stocks, which have increased in the last 4-5 weeks due to expectations of an end to the cycle of rising interest rates will have an immediate negative impact due to the increase,” said Kanth Kislaya, head, research, MAPE values.
The average lending rate (working capital and long-term loans) to those with less than a AAA rating is now at 10.5% -14%.
“Investment demand is certainly expected to be affected by these high interest rates,” said Ramanathan K, CIO, ING Investment Management.
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With rates on the northern shore of the one-year certificate of deposit (CD) rate, the rate at which banks borrow in the market, which stood at around 9.5 to 9.6% may also increase marginally according to observers.
Source: [TOI]
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