Debt game: how to surf the interest rate regime
Hardening interest rates has made debt as another attractive investment option to maximise the returns. Sachin Kumar reports. Interest rates offered by debt instrumentsindia Updated: Jan 01, 2011 01:34 IST
Hardening interest rates has made debt as another attractive investment option to maximise the returns.
Experts say as the stock market is expected to remain volatile and interest rate firm this year, one should invest in post office saving schemes, bank fixed deposits and fixed maturity plans of mutual funds to get assured returns of up to double digits.
“There is a strong upward bias in interest rates in 2011 due to inflationary pressure,” says Rupa Rege Nitsure, chief economist, Bank of Baroda. “Inflationary pressures will be more pronounced in 2011 than 2010.”
Deposit rates, which were in the range of 6% on the onset of 2010, are now up at 8.5%. On the other hand, EPF, PPF, NSC, and post office saving schemes are the evergreen option of getting assured returns and providing tax benefits. Fixed maturity plans of mutual funds are another option, which are offering interest rate up to 9%.
“Those who fall in lower tax bracket and are reluctant to take higher risk by entering stock market should invest in FDs and fixed maturity plans, which can offer 8-9% interest per annum,” says Amar Pandit, a Mumbai based financial planner.
Equities may remain volatile and hence investors should not look for high return from equities in 2011 but invest in it with a long-term horizon.
“Debt should be the play this year and over the next six months investors should look to move from short-term debt to long-term debt as they can give double digit returns,” said Surya Bhatia, a Delhi-based financial planner.
He advised that investors should not miss this minimal risk asset class generating double-digit return.