Mutual Fund FMPs and Liquid Mutual Funds best when Interest Rates Rise

Invest In Tax Saving Mutual Funds Online

Download Tax Saving Mutual Fund Application Forms

Buy Gold Mutual Funds

Call 0 94 8300 8300 (India)

 

Mutual Fund FMPs and Liquid Mutual Funds best when Interest Rates Rise

 

The first talk of withdrawal of stimulus by the US Federal Reserve (central bank of the US) on May 22 this year marked the beginning of uncertainty in the Indian markets. Debt, equity, foreign exchange, none was spared as foreign institutional investors (FIIs) suddenly turned net sellers in the Indian markets. This was primarily due to US government bonds becoming more attractive as compared to debt and equity assets of emerging market economies like India.

To put it in perspective, FIIs have sold a total of $12.6 billion (Rs 75,326 crore) worth of securities from Indian debt market between May 22 and October 9. As a consequence, increased demand for dollar aggravated by speculation on rupee, led to it touching a record low of Rs 68.83 to a dollar on August 28.

In order to curb this speculation and support the Indian rupee, RBI came out with extraordinary measures to tighten liquidity. This led to a rise in short term rates by at least 200 basis points (100 basis points = 1 percentage point).

This led to volatility in the returns of the debt mutual fund schemes, which invest in these securities. Even the returns of liquid mutual funds, considered safest of all, turned negative.

Now what should an investor do in such a volatile scenario. Should one redeem at a loss? Or stay invested? If one stays invested for a longer period of time, one can ride over short-term volatility as extraordinary measures are for extraordinary situations and once the normalcy is attained they are unwound gradually.

In a rising rate scenario one should take advantage of higher short-term rates and invest in products such as liquid funds and fixed maturity plans (FMPs).

Investors must be aware that debt mutual fund categories such as short term plans, dynamic bond funds, income funds and gilt funds have inherent interest rate risks and as such they should be looked at only after aligning one's investment horizon and risk appetite, in consultation with one's financial advisor.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. ICICI Prudential Tax Plan Invest Online
2. HDFC TaxSaver Invest Online
3. DSP BlackRock Tax Saver Fund Invest Online
4. Reliance Tax Saver (ELSS) Fund Invest Online
5. Birla Sun Life Tax Relief '96 Invest Online
6. IDFC Tax Advantage (ELSS) Fund Invest Online
7. SBI Magnum Tax Gain Scheme 1993 Invest Online
8. Sundaram Tax Saver Invest Online
9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

1. Largecap Funds Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Tax Saver MutualFunds Invest Online
1. ICICI Prudential Tax Plan
2. HDFC Taxsaver
3. DSP BlackRock Tax Saver Fund
4. Reliance Tax Saver (ELSS) Fund
6. Gold Mutual Funds Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund