Current Economic Scenario: Time to invest in Fixed Deposits?

Posted: September 4, 2011 in Uncategorized

The current economic situation is better termed as ‘uncertain’ rather than blatantly labeled as a ‘recession’. Investors in India who have their money invested in Equity and Mutual Funds are probably tearing their hair apart because there have been losses witnessed in all sectors. Here are some top reasons why you should have fixed deposits to see you through rough times, especially the current market scenario in India.

fixed deposit Why is the current economic scenario a good time to have fixed deposits?

Beat the recession – Fixed deposits have a fixed rate of interest

The rate of interest on fixed deposits vary from time to time when the Reserve Bank of India changes the rates. But effectively, you are locked in for a rate that is applicable to your fixed deposit in India with the prevailing rate.

For example, if one decides to lock in Rs. 100,000 for a period of 3 years with SBI right now, you can access rates like 9.25%. So for the next 3 years, whether the Sensex stumbles down to 10,000 or 8,000, fixed deposit investment in India will keep earning 9.25% regardless of the market scenario.

Fixed deposits are great in the current economic situation in India – the RBI rate rise

RBI recently made its 11th rate rise in the last 18 months? So, what does this mean for you as an investor?

In simple words, one will have access to better rates on bank deposits and fixed deposits in India. In an economic situation like this where every basis point matter, a 1 or 2% increase in rates of fixed deposits in India is a welcome sight to any investor’s portfolio, isn’t it?

Fixed deposits help avert a cash crisis

While many of us are still trying to find ways to beat the cash crisis in the current economic situation in India, intelligent investors have already benefited by taking out personal loans against their fixed deposits in India.

If you didn’t know, banks generally offer loans against fixed deposits to its customers who have a lending rate of about 200 basis points, or 2% higher than their rate of interest earned on the fixed deposit. It beats paying 16-18% on a personal loan to manage a cash crisis, doesn’t it?

Fixed deposits help lock money

Okay, here’s getting a bit deeper into an investor’s psyche. We all like to go on a spending spree especially when it comes to buying stocks when the stock market is down. But do we really know when the stock markets have bottomed out?

The current economic situation in India is plagued not only by political instability but also the pressure of a global slowdown. Many investors emptied their pockets to buy into stocks when the market breached levels of 17,000. What happened next? The markets tumbled further.

Here is where fixed deposits come into the picture. Fixed deposits in India offer investors a chance to simply ‘lock-away’ a part of their investment. This may be only a psychological safeguard against falling markets and a bleak economic situation, but you can thank us later for stopping you from blowing away more money on falling stocks.

We’ve talked about the benefits of fixed deposits in India especially in the current economic scenario. Check out some of the products and rates on offer for fixed deposits in India from some of the leading banks in the country.

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