Looking for safe, higher returns? Bank on FDs | india | Hindustan Times
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Looking for safe, higher returns? Bank on FDs

india Updated: May 09, 2011 01:13 IST
Sandeep Singh
Sandeep Singh
Hindustan Times
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Looking for security of investments and assured returns in his old age, Krishna Kumar Vij, a 78-year-old resident of Gurgaon has sold almost 85% of his equity investments over the last few days and has reinvested it in fixed deposits (FDs).

“I used to get tense watching the state of my equity investments,” Vij said. “And now at 10% the bank FD is offering me a higher but safe and assured return.”

Higher returns on fixed deposits are slowly turning the zero-risk, boring FDs exciting. Already in double digits, returns on FDs are expected to rise further, turning them into an attractive investment option for senior citizens in an inflationary environment where the equity markets are volatile, real estate flat and gold having moved into speculative territory.

After the Reserve Bank of India (RBI) announced a hike in policy rates by 0.5 percentage points on Tuesday, IDBI Bank, Yes Bank, Punjab National Bank and Oriental Bank of Commerce have already announced an increase in their deposit rates. Yes Bank is offering 10.35% on its 15-month-22-day FD to senior citizens.

“I expect deposit rates to remain firm and even move up from here over the next six months,” said KVS Manian, head of retail liabilities, Kotak Mahindra Bank, which is offering close to 9.5% on various deposit tenures and 10% to senior citizens. “We will review our rates over the next few days,” he said.

Over the past six months, the Sensex at the Bombay Stock Exchange has fallen by 15.6% and may not make a quick move upwards with rising inflation pushing RBI to increase interest rates in the economy that in turn are likely to cut India's GDP growth from 9% to 8%.

"I don't see markets making an upward move over the next six months unless we see a great surprise in the monsoon, oil falling to $80 per barrel and the government pricing a couple of IPOs attractively," said a market expert who did not wish to be named.

Financial planners are suggesting that money meant for debt investments can be locked in for a longer term now.

"The interest rates are close to peak now and investors can park their money for 2-3 years in FDs in banks offering higher rates," said Amar Pandit, a Mumbai-based financial planner.

"Investors should, however, not mix their asset allocation and keep the money meant for equity investments in liquid funds," he said.

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