With RBI expected to cut interest rates later this year, where should you invest?

livemint.com:

cut the interest rates later this year, thus kicking off the rate cut cycle in the market. However, RBI in its Feb 2024 monetary policy meeting (MPC) kept the interest rates unchanged for the sixth time in a row. But this is expected to change as the banking regulator is likely to go for the interest rate cut later this year, Reuters reported.

In the US too, the Federal Reserve indicated that it might opt for three rate cuts this year. And when that happens, there are a slew of investment opportunities which small investors can explore. These include long term bonds, gilt funds of 1.5 to 2-year duration, long term term-deposits and balanced mutual funds with equity allocation lower than 65 percent.

Let us explore more on this here. 1. Long term Bonds: During rate falling scenarios, long term instruments are believed to be a rational investment choice.

Moreover, the Indian bond market is seen to be in a better shape with the upcoming bond index inclusion. “In an interest rate falling environment, adding long duration debt can help. We suggest investing in long dated government bonds directly or via long duration debt funds that invest in government securities.

While we don’t expect a sharp decline in interest rate this year, we think the trajectory is downward. We think the bond inclusion is a structural positive and could help fixed income markets," says Alekh Yadav, Head of Investment Products, Sanctum Wealth. “It is advisable to stay invested for a long period so that one can make money by redeeming the bonds at a later stage because interest rates, itself, won’t give you much," says Prof Saumya Aggarwal, an Assistant Professor in Commerce Department, Sri Ram College of Commerce (SRCC), University of Delhi. 2.