Fixed Deposits Are Expected to Perform Exceedingly Well Soon

By BankBazaar | May 2, 2012

If you have invested a large corpus of your funds in fixed deposits, then you must have been quite disappointed with the recent introduction of the floating interest rate on various loans like personal loan, home loan etc. But do not despair as it is only a matter of time, before fixed deposits acquire their former glory again. This is especially true since the central bank of the country, the Reserve Bank of India, has been quite persistent in its decision to tighten the policy measures of the country. Also, your bank fixed deposits are expected to dole out a lot more to you. This is because of the Reserve Bank of India’s surprise gesture to with a sudden hike in its reverse repo rates, which is the rate in which banks deposit their surplus funds with the central bank. It also hiked its repo rates, which refers to the rate at which the Reserve Bank of India lends funds to other banks. Investors can gleam with joy as the current monetary tightening measures of the central bank are expected to draw to a close very soon in the country.

Banks have been prudent to indicate that they aren’t expecting any gigantic rise in the current rates of interest, as already, much of the hike in rates have been consistently subject to the discounting of the market. Further, there is no denying that banks have been pressurized to hike their rates of deposits, in addition to their rates of certificates of deposits. As fixed deposits are expected to offer better returns to their investors, your actual returns minus inflation are going to react positively after quite some time. This definitely spells out good news for investors in capitals. Real rates are also expected to crawl back into positive territory. The eventual fall in the rate of inflation combined with the firming up of interest rates are also said to be beneficial for the investors of fixed income instruments. Although rising rates of interest can be quite detrimental to the behavior of the market, it can also lead to large-scale profitability of companies.

Corporate houses are maintaining that they will continue to benefit as long as there is a situation of economic growth and high consumer spending in the nation. However, it is important for the operating world to exercise caution while dealing with stocks, since they need to direct a great deal of importance towards valuation. It is important for investors to control any form of panic with respect to the market and must rather view it as a way to secure profitability in the long run. Listen to your financial planner and place your faith and belief in him as they are experienced spectators of the market. Investors need to have the maturity to understand that all asset classes undergo ups and downs and it is quite symbolic of their behavior. Although investors seek to avoid the lows of the market and try and make maximum profits during its highs, you must understand that this is not the best way to behave in the market. In order to recover your investments, continue investing in the market in a staggered manner for at least a period of 6 months. Although many may feel that the market is in quite a shaky stage now, equity investments are set to attain its profitable status of befitting long-term investments soon. Try and make investments for a minimum period of at least 5 to 6 years as they will provide the best safeguard for investors against the top-turvy market conditions. Making short-term investments for a period of 2or 3 years is a big no-no keeping the current volatile market conditions in view.

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