Read on to find what a few
leading IFAs are recommending.
RBI finally gave a breather to corporate India by cutting repo rate, the rate
at which the central bank lends to banks, by 50 basis points from 8.5 percent
to 8 percent.
Hemant Rustagi of Wiseinvest Advisors says that
investors with one year time horizon can consider investing in short term debt
funds. “Investors with long term horizon should wait for tax free bonds because
of the tax efficiency of these bonds. Investors who have already locked in
rates in FMPs need not worry. As far as new FMPs are concerned, investors can
consider investing in one year FMPs. In the open ended category, short term
bond funds and dynamic bond funds look good.” Dynamic bond funds are actively
managed funds which realign their portfolios as per the interest rate cycle.
Gajendra Kothari of Etica Wealth Management
advises investors to take exposure to corporate bond funds and gilt funds. He
recommends MIPs to investors having two to three year time horizon. “Funds with
higher duration like corporate bond funds and gilt funds will rally. Investors
with two to three year time horizon who do not wish to invest in equities can
invest in gilt funds or corporate bond funds. Dynamic bond funds would be a
good bet for investors with one to two year time horizon,” says Gajendra.
Corporate bond funds usually invest in longer
duration papers. Due to the inverse relationship between yield and bond prices,
any further rate cut would push up the prices of bonds.
Lovaii Navlakhi, Founder & CEO, International
Money Matters, strikes a cautionary note. “The RBI has indicated that there is
little scope for further rate cuts in the immediate future so yields will again
start moving upwards. This is a good time to take the money out if investors
don’t have a long term outlook,” says Navlakhi.