Finally, the Reserve Bank of India (RBI) has signalled that it is shifting towards an easy money policy. The central bank has cut repo rate, the rate at which it lends money to banks, by 25 basis points (0.25 per cent) today.
Typically, falling interest rates are music to debt mutual fund investors, especially to investors in long-term debt schemes. Debt funds benefit from falling rates because of the inverse relationship between yields and prices of securities. When yields fall, the prices of securities go up.
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