KOCHI: The Reserve Bank of India’s (RBI) latest policy move — a 25-basis-point repo rate cut nd a shift in stance from ‘neutral’ to ‘accommodative’ — has signalled a clear pivot toward supporting growth amid global uncertainty.
For investors, depositors, and borrowers, this marks the beginning of a fresh rate cycle that calls for a strategic rethink on how to allocate money across fixed-income nstruments, loans, and deposits.
India’s 10-year benchmark bond yield inched lower post the announcement, reflecting a market that had priced in the cut but is now adjusting to the central bank’s dovish tilt.
With the door open for further easing and rate cut, fixed income assets have come back into focus.
What should investors do now?
The current environment favours a tilt towards fixed-income products, especially for those looking to lock in stable returns in an otherwise volatile global setting.
As interest rates decline, bond prices typically rise — making long-duration and gilt funds attractive bets for capital appreciation. Investors with a moderate risk appetite and a longer horizon could benefit from duration strategies, while those wary of rate volatility might find dynamic bond funds a better fit.
The steepness at the long end of the yield curve — where the spread between 10- and 30-year bonds remains notable — also creates room for price gains as and when the curve flattens.
Barbell strategies, which combine short- and long-duration instruments, can offer a balance between liquidity and return potential.
What about fixed deposits?
While rate cuts generally spell lower FD returns, depositors still have a window to lock in higher yields before banks recalibrate rates downward.
Fixed deposits with longer tenures, especially those offered by private and small finance banks, continue to deliver 8 per cent or more in certain brackets. For risk-averse savers, now is the time to secure these higher yields before they begin to fade.
Depositors should also weigh laddering strategies — spreading investments across different maturities — to balance reinvestment risk in a declining rate environment.
Borrowers stand to benefit
Borrowers, particularly those with floating-rate home or personal loans, are set to gain as transmission picks up in the coming months. As banks recalibrate their lending rates in line with the repo cut and easing liquidity, EMIs are likely to soften.
For those considering big-ticket borrowing, this could be a good time to evaluate options before credit costs start trending back up.
However, with the global economy facing headwinds from rising trade tensions and tariff-led uncertainty, borrowers should remain mindful of future risks and avoid overleveraging.
