Short Term Debt Funds more rewarding than Bank FDs

Short Term Debt Funds more rewarding than Bank FDs

Post RBI Policy, Short Term Debt Funds are likely to give better returns than Bank FDs

RBI in in the first monetary policy review for FY 2018, Kept,

  • Repo rate unchanged at 6.25 per cent
  • Reverse repo rate have gone up by 25bps to 6 per cent

    short-term-debt-funds,Short Term Debt Funds

    Debt Funds

  • MSF rate has fallen by 25bps to 6.50 per cent
  • CRR left unchanged at 4 per cent

Also said that inflation to be at 4% with +/- 2% variation.The objective of narrowing the monetary policy rates is to ensure the short term interest rates are close to policy rates, This should results in short term rates moving up by 25 to 30 bps.

How should investors look at debt fund now ?

Fresh investment in debt funds are expected to go in to short term funds as these policy would expected to remain unchanged for next 3 quarters at least.

Yields on such funds are attractive and also lower taxation if held for three years.

In comparison expected returns on FD are 7% vs Short term debt funds would be around 8.5 to 9%

Thanks,Tw. – http://TwNiftyTips.Com

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