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<ul><li>STT increased on futures and options trading </li><li>Changes in <keyword id="22258595" type="General" weightage="20" keywordseo="TDS-rates" source="keywords">TDS rates</keyword> (from 5% to 2%) on payments for life insurance policy, brokerage </li><li>Buybacks to be treated as dividends for taxation purposes</li><li>Small savings account rates left unchanged for Oct-Dec 2024</li></ul>Starting October 1st, a lot is set to change with your money. From <keyword id="20852321" type="General" weightage="100" keywordseo="FO-trading" source="keywords">F&amp;O trading</keyword> (futures and options) and buybacks getting more expensive in the hands of the individual, to changes in TDS slabs for payments concerning life insurance, brokerage, and more, here's a ready reckoner for all that you need to know: 1. STT upped for F&amp;O (Futures and Options) trading This budget, in a bid to discourage retail investors from burning their hands in the highly risky F&amp;O segment, the government had proposed raising the STT (securities transaction tax) for both futures and options. Starting today, you will have to pay an STT of 0.1% on premium earned from option sales, as opposed to 0.0625% previously. As for futures, the STT is set to rise to 0.02% of trade price, up from its previous mark of 0.0125%. Notably, STT is levied every time an individual purchases or sells a security, which significantly increases its incidence and coverage. For instance, if the trading price of the futures you're selling today is Rs 1,000, you'd have to pay Rs 0.2 as STT today. Till September 30th, the STT applicable would be Rs 0.12. Similarly, for options, if the settlement price of your options contract is Rs 1,000, your STT payable today would be Re 1, which earlier stood at Rs 0.625 While this may sound super inconvenient for frequent or intraday traders, a recent SEBI study has highlighted that a staggering 93% individual traders have incurred just losses while trading in the F&amp;O segment between FY22 and FY24, with the total losses exceeding Rs 1.8 lakh crore during this period. Only a tiny 1% traders managed to rake in profits above Rs 1,00,000. Perhaps SEBI is thinking along the lines of prevention being better than cure? 2. Changes in Debit card rules for ICICI bank ICICI debit card users, who also happen to be frequent flyers, listen up! Starting today, you will be able to access the complimentary airport lounge service twice, but only if you have spent Rs 10,000 or more via your card in the previous quarter. So, suppose you've spent just Rs 8,000 between July-September 2024 via your ICICI debit card. Since this falls below the Rs 10,000-threshold, you wont be able to access complimentary airport lounge service two times between October-December 2024. 3. Changes in rules for PPF, small savings account The interest rates on various small savings schemes were left unchanged by the Finance Ministry for the upcoming quarter i.e. October-December 2024. For this quarter, Public Provident Funds (PPF) will earn you 7.1% interest p.a., while Sukanya Samriddhi Yojana (SSY) and Senior Citizens Savings Scheme (SCSS) will offer interest at the rate of 8.2% p.a. <div type="Article" hostid="261" msid="113692667" title="Attention! Here's what's changing with your PPF accounts starting 1st October, 2024" mstype="2" mssubtype="0"></div> Also, these changes in PPF accounts will kick in from today: <ul><li>Have a PPF account in your child's name i.e. a minor? This account would earn the same interest as a POSA (Post Office Savings Account) i.e. at 4% p.a. currently. Once your child turns 18, the prevailing PPF interest rate, which is presently at 7.1%, will be levied. </li><li>No more interest earning via multiple PPF accounts! Starting today, only your primary PPF account will be eligible for interest. </li><li>Are you an NRI who currently holds an active PPF account, and you have not disclosed your residency status in Form H (used to extend the tenure of your PPF account by blocks of 5 years)? Starting today, such accounts will earn zero interest. </li></ul>4. Buyback set to get more expensive Buybacks happen when a company decides to buy back its own shares from its existing shareholders. What's in for the shareholders, you ask? The buyback price is usually higher than what is offered by the markets. You are eligible to participate in a company's buyback if you hold its shares on or before the record date that's set by the company. Starting today, buybacks will be treated just like dividends. This means starting today, the burden of tax payable on buybacks will fall on the shareholders selling the shares, and not the company. Buybacks will be taxed as per the individual's personal income tax bracket. 5. Revision of TDS rates Starting today, the TDS (tax deducted at source) on various payments you make for life insurance, lottery tickets and more is also set to change. Here's how TDS rates will look, starting today: <table class="redcator-table-advance"><tbody><tr><td>Category </td><td>Previous TDS rate</td><td>New TDS rate (Effective October 1st, 2024)</td></tr><tr><td>Payment made towards life insurance policies</td><td>5%</td><td>2%</td></tr><tr><td>Commission earned on sale of lottery tickets </td><td>5%</td><td>2%</td></tr><tr><td>Payment of commission/ brokerage </td><td>5%</td><td>2%</td></tr><tr><td>Payment of rent by certain individuals/HUF </td><td>5%</td><td>2%</td></tr><tr><td>Payment made by e-commerce operators/platforms to e-commerce participants/sellers </td><td>1%</td><td>0.1%</td></tr></tbody><tbody></tbody><tbody></tbody></table>

Attention! Here's what's changing with your PPF, F&O trading, and buybacks, starting today!

<ul><li>The reliability of FDs is appealing to seniors as they generally have a lower risk tolerance and prioritise capital preservation over high returns. </li><li><keyword id="20566" type="General" weightage="20" keywordseo="senior-citizens" source="Orion">Senior citizens</keyword> usually get a slightly higher interest in FDs. </li><li>FDs can help senior citizens effectively manage liquidity as well as <keyword id="37018" type="General" weightage="20" keywordseo="interest-rate" source="Orion">interest rate</keyword> risk. </li></ul>Senior citizens often prefer investing in <keyword id="6377620" type="General" weightage="20" keywordseo="fixed-deposits" source="Orion">fixed deposits</keyword> (FDs) due to the safety and stability these instruments offer. FDs provide a secure investment avenue with a guaranteed return on the principal amount, making them a low-risk option, especially for retirees seeking steady income streams. The reliability of FDs is appealing to seniors as they generally have a lower risk tolerance and prioritise capital preservation over high returns. The ease of FD investment, with options for short or long-term deposits, aligns well with the financial planning needs of seniors, providing them with a sense of financial security and a dependable source of income during retirement. Between May 2022 and February 2023, the Reserve Bank of India (<keyword id="30067" type="General" weightage="20" keywordseo="rbi" source="Orion">RBI</keyword>) raised the repo rate by a cumulative 2.5%. This significant increase was a major driver of higher <keyword id="418668" type="General" weightage="20" keywordseo="fd-rates" source="Orion">FD rates</keyword> throughout 2023. Even though the RBI has maintained status quo henceforth, FD rates continue to remain on the higher side, thus making them attractive. “Senior citizens usually get 50 to 100 bps more interest than the general public by investing in fixed deposits. But the interest income is taxable at the hands of investors if the tenure is less than 5 years,” says Abhishek Kumar, founder and chief<a href="https://business.outlookindia.com/invest/investment"> </a>investment advisor at SahajMoney, a financial planning firm. Sr Citizen FD rates at a glance <table style="border-width: initial; border-style: none;"></colgroup><tbody><tr><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#1465c9;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Bank Name </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#1465c9;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Less than 1 year </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#1465c9;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">1 year to 5 years </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#1465c9;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">More than 5 years </td></tr><tr><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">SBI </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">3.50% p.a. to 6.25% p.a. </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.00% p.a. to 7.50% p.a. </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.50% p.a. </td></tr><tr><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Punjab National Bank </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">4.00% p.a. to 6.75% p.a. </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.25% p.a. to 7.75% p.a. </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.30% p.a. </td></tr><tr><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Bank of Baroda </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">3.50% to 6.75% </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.25% p.a. to 7.75% p.a. </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.50% p.a. </td></tr><tr><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">HDFC Bank </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">3.50% p.a. to 6.50% p.a. </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.10% p.a. to 7.65% p.a. </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.75% p.a. </td></tr><tr><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Axis Bank </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">3.50% p.a to 6.50% p.a </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.20% p.a. to 7.60% p.a. </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:top;background-color:#ffffff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.75% </td></tr></tbody></table> What to keep in mind When investing in FDs, senior citizens need to take a few things into account. When the rates are good, one can lock in some of their savings into FDs. “I advise senior citizens against locking all their disposable funds into FDs particularly of just one tenor,” says Akshar Shah, Founder, Fixed Invest, a digital marketplace of banks and NBFCs. “Senior citizens can use FD laddering to effectively manage liquidity as well as interest rate risk where they divide their savings into FDs of different tenors across years,” he adds. FD laddering involves diversifying FDs into multiple accounts with varying maturity dates. Instead of investing a lump sum in a single FD, individuals distribute their funds across different FDs maturing at different intervals—short-term, medium-term, and long-term. As each FD reaches maturity, it can be reinvested or withdrawn as needed, providing regular access to funds while potentially benefiting from higher interest rates on longer-term deposits. This strategy offers liquidity, steady returns, and flexibility in managing financial goals.

Senior citizen FDs: With interest rates at a high, time to park safe

<ul><li>Economies around the world are focusing on attaining growth and taming inflation by increasing borrowing rates. </li><li>The rising borrowing rate environment has made fixed-income products far more attractive compared with equity investments that are facing risks of high valuation and macro headwinds. </li><li>Analysts say that this is a good time to look at fixed-income products because the rate hike cycle has almost peaked. </li></ul>After a long time, fixed income products have emerged as an attractive investment opportunity, especially for retail investors. This is because economies are focusing on attaining growth and taming inflation by increasing borrowing rates. Due to high inflation, the US central bank has taken measures to stop its economic stimulus – also known as quantitative easing – that began as inflation rates shot up. The US Federal Reserve has raised interest rates by 450 basis points since March 2022. Its current benchmark interest rate is the highest since October 2007. The idea behind rising interest rates is that it will make borrowing costs higher, which can then cool off demand and slow down inflation. On the bright side, the rising borrowing rate environment has made fixed-income products far more attractive for Indian investors compared with equity investments that are facing risks of high valuation and macro headwinds. Investments into good old fixed deposits of banks have regained prominence with the rising rate cycle, as banks offer returns of about 7% on such products. Some bank with their revised <keyword id="35480" type="General" weightage="20" keywordseo="fixed-deposit-rates" source="Orion">fixed deposit rates</keyword> as on Feb 21 <table style="border-width: initial; border-style: none;"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Banks </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">FD rates for 2-3 years </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">FD rates for 3-5 years </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Axis Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">7% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">7% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">HDFC Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">7% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">7% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">State Bank of India </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">7% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">6.5% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Punjab National Bank </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">7% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">6.50% </td></tr></tbody></table> Source: Axis Bank, HDFC Bank, SBI, PNB websites Other fixed income instruments like non-convertible debentures (NCDs) are also offering higher yields to investors. For instance, redeemable NCDs issued by Avanse Financial Services recently offer a yield of 9.25% with a minimum ticket size of ₹1 lakh for a tenor of 36 months. Equities turn volatile A rise in the US interest rates does not bode well for the Indian equity markets, as it can lead to foreign investors pulling their money out from emerging markets like India to deploy it back in the safe and secure markets of the US or other more lucrative markets. As a result, foreign institutional investors (FIIs) have been selling consistently in India since December and moving their <a href="https://www.businessinsider.in/stock-market/news/foreign-investors-continue-to-pull-out-of-indian-stocks-sell-equities-worth-3431-crore-in-feb-so-far/articleshow/97698730.cms">investments from Indian markets to cheaper markets </a>like China, Hong Kong and South Korea, where valuations are attractive. In January, FIIs sold Indian equities worth ₹41,464 crore and in February, so far, they have sold ₹1,567 crore equities. Also, retail participation in equities dropped to a 34-month low in January due to a sharp fall in equities and a revival of fixed income in the <a href="https://economictimes.indiatimes.com/markets/stocks/news/retail-play-in-equity-continues-to-fall-hits-34-month-low/articleshow/98075535.cms">wake of rising interest rates</a>. “Equity and debt are two different asset classes. Nevertheless, asset allocation is very crucial for consistent long-term wealth creation. Having said that, looking at the current global and macroeconomic variables, fresh allocation to fixed-income products might be a wiser investment decision,” said Marzban Irani, chief investment officer – fixed income at LIC Mutual Fund. Irani says that this is a good time to look at fixed-income products because the rate hike cycle has almost peaked. Fixed-income products may remain attractive at least till 2024 Moreover, fixed-income products may continue to be attractive for investors till the Reserve Bank of India (RBI) does not cut interest rates. Since May 2022, India’s central bank has raised the repo rate – a key interest rate – by 250 basis points to 6.5%. “We do not expect any rate cuts this year in India and assign a low probability of rate cuts abroad also. In our view, the central banks may not be in a hurry to cut rates unless economic growth takes a severe downturn,” said Puneet Pal, head-fixed income at PGIM India Mutual Fund. Inflation print for January 2023 sprung a surprise with the consumer price index (CPI) rising to 6.52% while economists expected it to be between 6% to 6.2%. Economists expect inflation to cool down to 5% by April this year, comfortably below the upper tolerance limit of 6% set by the RBI. With inflation expected to cool down, analysts expect RBI to start cutting interest rates from next year. “The current yields present a good opportunity to invest in fixed income across the curve from a medium-term perspective as we expect RBI to start cutting rates from 2024 onwards. With inflation expected to soften towards 5% over the course of the next two quarters, the real yields will continue to be positive across the curve. Thus, we believe that it’s a good time to start constructing a fixed-income investment portfolio,” added Pal. For investors looking at a short-term investment horizon, Irani recommends funds in money market and liquid fund categories; and for those looking to invest beyond 3 years, he recommends medium-to-long-duration funds, banking &amp; PSU debt funds and gilt funds. SEE ALSO <a href="https://www.businessinsider.in/business/news/paytm-zomato-policybazaar-nykaa-companies-attain-spotlight-again-after-q3-performance/articleshow/98003305.cms">New age technology companies back in the spotlight after Q3 performance</a> <a href="https://www.businessinsider.in/stock-market/news/fiis-pump-in-6000-crore-in-5-sessions-as-emerging-markets-turn-attractive-again/articleshow/98017229.cms">FIIs pump in ₹6,000 crore in 5 sessions as emerging markets turn attractive again</a>

Fixed-income products attractive again as markets take a breather

<ul><li>Long-duration <keyword id="35474" type="General" weightage="20" keywordseo="debt-funds" source="Orion">debt funds</keyword> are a category of mutual funds that primarily invest in fixed-income securities with extended maturity periods of seven years or more. </li><li>Long-term bond funds tend to exhibit an inverse relationship with interest rates.</li><li>Once interest rates start coming down as expected, investors in long duration debt funds will be benefited. </li></ul>With the Nifty surpassing 22,000 and the Sensex above 73,000, the bulls are making merry on Dalal Street. Indian investors, seeking to ride the wave, are going gung-ho about mutual funds, especially in the small and mid-cap category, but debt funds are not in vogue. However, investment gurus say that no investor should ignore debt funds because it is an important part of asset allocation. Moreover, at present, a category of debt funds, known as long duration debt funds, is creating a buzz. This is because currently the repo rate is 6.50% after the Reserve Bank of India (<keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword>) maintained status quo for the fifth consecutive time in its last policy. Before that the RBI had hiked the repo rate by 2.5% from May 2022 to February 2023. “With the high interest rate regime behind us, interest rates are expected to reduce going ahead, aided by moderating inflation and crude oil prices. We expect RBI to cut interest rates in 2024,” says Ajaykumar Gupta, chief business officer, TRUST Mutual Fund. If this unfolds, it is good news for long term debt funds. “A cut in interest rates would lead to additional gains in form of bond price appreciation, which would benefit investors investing in <keyword id="6775742" type="General" weightage="20" keywordseo="long-duration-funds" source="Orion">long duration funds</keyword>,” says Gupta. What are long duration funds? Long-duration debt funds are a category of mutual funds that primarily invest in fixed-income securities with extended maturity periods of seven years or more. “These funds, having a portfolio Macaulay duration of more than seven years as per SEBI mandate, typically invest in instruments like Government bonds, corporate bonds, treasury bills, bonds issued by banks etc., making them suitable for long term investors,” says Gupta. Macaulay duration is a measure used in finance to estimate the weighted average time it takes for an investment to recover its initial cost in the form of present value of future cash flows, including interest and principal payments. “However, there are different kinds of debt funds that can take a long-term debt fund kind of form- dynamic bond funds or gilt funds- fund managers can invest in long duration bonds,” says Pankaj Pathak, fund manager, fixed income, Quantum AMC. Relation with interest rates Long-duration debt funds tend to exhibit an inverse relationship with interest rates. Whenever interest rates fall bond prices move up and vice versa. When interest rates fall, mutual funds that invest in long-term bonds typically experience an increase in bond prices. As bond yields move inversely to interest rates, the existing fixed-rate bonds held by these funds become more attractive. The higher bond prices contribute to capital gains for investors. “If the interest rate goes up, the return of long duration debt funds comes down. If interest rates start coming down then the return of long duration bond funds go up. The credit risk of long duration debt funds is not that high as they invest mostly in government securities, but the interest rate risk is very high,” says Soumya Sarkar, Co-Founder, Wealth Redefine, an AMFI registered mutual fund distributor. <table style="border-width: initial; border-style: none;" class="redcator-table-advance"></colgroup><tbody><tr><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:bottom;background-color:#1589ff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Funds </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:bottom;background-color:#1589ff;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">1 year return (%) </td></tr><tr><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Aditya Birla Sun Life Long Duration Fund - Direct Plan </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.57 </td></tr><tr><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Axis Long Duration Fund - Direct Plan </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">6.92 </td></tr><tr><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">ICICI Prudential Long Term Bond Fund - Direct Plan </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">6.87 </td></tr><tr><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Nippon India Nivesh Lakshya Fund - Direct Plan </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.07 </td></tr><tr><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">SBI Long Duration Fund - Direct Plan </td><td style="border-left:solid #000000 0.68181825pt;border-right:solid #000000 0.68181825pt;border-bottom:solid #000000 0.68181825pt;border-top:solid #000000 0.68181825pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.53 </td></tr></tbody><tbody></tbody></table> Source: Value Research Should you invest in long duration debt funds? Interest rates have seen a prolonged pause and thus fixed income proponents have been waiting for a pivot in stance. However, investors are advised to go with a cautious approach. “If the interest rates go up or the yields go up from here, one may see a negative return, for a short period of time, but if one has a two to three year time horizon, the interest should come down and one should generate good returns,” says Sarkar. The final word Selecting a good long duration debt fund requires careful consideration of various factors. “One must review the fund's portfolio holdings to understand the types of securities it invests in, including government bonds, corporate bonds, and other debt instruments. Further, one should examine the credit quality of the portfolio by reviewing the credit ratings assigned to the underlying securities,” says Gupta. One might also evaluate the fund's performance by comparing it to both its benchmark and other funds in the long-duration category. Individuals contemplating long-term investments should thoroughly evaluate their risk tolerance, investment objectives, and time horizon before deciding to invest in these funds.

Explained: Is this the right time to invest in long duration debt funds?

<ul><li>Typically, a non-convertible debenture carries a fixed interest rate that has an inverse relationship to how credit worthy the borrower is. </li><li>NCDs are more liquid than corporate FD as they are traded in the secondary market on stock exchanges. </li><li>Each <keyword id="131571" type="General" weightage="20" keywordseo="ncd" source="Orion">NCD</keyword> undergoes assessment by multiple <keyword id="147335" type="General" weightage="20" keywordseo="credit-rating-agencies" source="Orion">credit rating agencies</keyword>, portraying the issuer's capacity to honour payment commitments. </li></ul>A non-convertible debenture, (NCD), is a type of debt instrument that lacks the option for buyers to convert it into shares or equities until its maturity. When investing in an NCD, buyers have the choice to purchase or sell the instrument and receive interest payments determined by the issuer's fixed interest rate. “But they are more liquid than corporate FD as NCDs are traded in the secondary market on stock exchanges,” says Abhishek Kumar, founder and chief<a href="https://business.outlookindia.com/invest/investment"> </a>investment advisor at SahajMoney, a financial planning firm. Interest rate: Typically, a non-convertible debenture carries a fixed interest rate that has an inverse relationship to how credit worthy the borrower is. An NCD from a highly rated issuer tends to offer a lower interest rate. Credit rating: Each NCD undergoes assessment by multiple credit rating agencies, portraying the issuer's capacity to honour payment commitments. Strong financials and a healthy cash flow of the issuing company result in higher ratings for the issued NCD. Should you invest? One should be very clear about the quality of the NCD, what is the cash flow of the company and what is the risk one is going to take. One should consider the credit rating of these NCDs before investing. However, that may not be foolproof. Do not invest in NCDs just for higher <keyword id="6374680" type="General" weightage="20" keywordseo="returns" source="Orion">returns</keyword> Investing in NCDs may not be a good idea, even if you are going with a AAA rating, say experts. Certain NCDs have left a bad taste in the mouth off late. One example is that of the default of the Dewan Housing Finance Corporation Ltd (DHFL) NCD which was AAA rated but was offering a higher interest rate than some AAA rated NCDs. Same was the case with Infrastructure Leasing &amp; Financial Services Limited (IL&amp;FS), whose NCS was also AAA rated. “Even HDFC has a AAA rating , why should someone have to pay you more than the other? So, there is a perceived risk in the NCD which is offering higher returns” says Srinivasan, director and founder, Shree Sidvin Investment Advisors. Numerous NCDs are now being offered at attractive yields as a result of the increase in <keyword id="6371181" type="General" weightage="20" keywordseo="interest-rates" source="Orion">interest rates</keyword>. “However, one should be well informed about the company in which they want to invest, and they shouldn't base their investment decision solely on the basis of the high yields,” says Raghvendra Nath, MD, Ladderup Wealth Management. So higher interest rates of 9% or so should not be a reason to invest in NCDs. “We do tell our clients that for a difference of 2-3% in interest rate you should not take a principal risk,” says Srinivasan. Thus, when investing in NCDs, it pays to be careful.

NCDs may offer a higher interest rate than fixed deposits but experts advise caution

These small finance banks are offering up to 9.5 percent interest rate on FD in 2023

Explained: With markets volatile, should senior citizens invest in PSU bank FDs?

<ul><li>The fact that the country’s central bank is expected to continue with interest rate hikes in the near term, the product remains attractive.</li><li>So far in two months up till now, RBI has increased the repo rate by 90 basis points to fight record inflation.</li><li>With this, RBI's policy repo rate currently stands at 4.90%.</li></ul>Private sector bank Yes Bank recently launched a <keyword id="148844" type="General" weightage="20" keywordseo="floating-rate" source="Orion">floating rate</keyword> <keyword id="74427" type="General" weightage="20" keywordseo="fixed-deposit" source="Orion">fixed deposit</keyword> (<keyword id="1005" type="General" weightage="20" keywordseo="FD" source="Orion">FD</keyword>) product offering for its domestic customers. The product’s interest rate is now being linked with the prevailing repo rate. What is a floating rate fixed deposit (FD)? This is a unique offering designed to benefit customers by enabling them with an asset class that offers the safety of a fixed deposit along with dynamic returns which are linked to the repo rates published by the central bank. This floating rate FD can be availed for a tenure of 1 year to less than 3 years, as per the customer’s preference. “The floating rate product is very attractive in a rising interest rate environment. People may get attracted towards this keeping in mind that they are anticipating rate hikes for one or one and a half years,” Dwijendra Srivastava, CIO – Debt at Sundaram Mutual Fund. The fact that the country’s central bank is expected to continue with interest rate hikes in the near term to fight the record high inflation, this product stands attractive as the return rate will only go up for some time. “For the next one year, interest rates will only go up. However, two or three years down the line interest rates will fall and that’s when people will miss out because in floating rates products the rates will be adjusted accordingly,” said debt market expert Joydeep Sen. The bank will reset the floating FD rate on a monthly basis i.e. on the first day of every month subject to change in repo rate. So far in two months up till now, RBI has increased the repo rate by 90 basis points. In May, RBI hiked the repo rate by 40 basis points and further increased it by 50 basis points. With this, RBI's policy repo rate currently stands at 4.90%. “The rising interest rates environment is expected to be there for at least a year till March 2023,” said Srivastava. The deposit amount can be as minimum as ₹10,000 but less than ₹5 crore. Experts believe this is kind of an innovative product at this point of time and will open up more banks to launch it, particularly the smaller and weaker ones, who will be more competitive. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/telecom/news/5g-in-india-does-the-aam-aadmi-even-need-it/articleshow/92382529.cms">5G in India – does the aam aadmi even need it?</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/finance/news/heres-what-card-tokenization-is-and-how-to-tokenize-debit-and-credit-cards/articleshow/92403898.cms">Here’s what card tokenization is and how to tokenize debit and credit cards</a>

A floating rate fixed deposit can be a good investment, for the next one year

<ul><li>In the last two years, interest rates on loans have gone up by 1.9% – undoing the <keyword id="6357050" type="General" weightage="20" keywordseo="EMI" source="Orion">EMI</keyword> mathematics of most borrowers. </li><li>Most experts predict that there are more rate hikes coming as early as December. </li><li>For auto and <keyword id="35519" type="General" weightage="20" keywordseo="home-loans" source="Orion">home loans</keyword>, borrowers can consider extending their tenures if the burden is higher. </li></ul>Be prepared to pay more interest if you want to borrow to buy a home or a car. The era of low interest rates has formally ended, with the Reserve Bank of India kicking off its rate hike cycle in May. The repo rate or the rate at which central banks lend to banks has risen by 1.9% after four consecutive hikes. That means EMIs will only go up making it costlier for borrowers. While existing borrowers of home loans may see their tenures go up, equated monthly installments (EMIs) of personal loans and <keyword id="35527" type="General" weightage="20" keywordseo="auto-loans" source="Orion">auto loans</keyword> will rise further after today’s 50 basis point rate hike. "The Reserve Bank of India has hiked the repo rate by 50 basis points. This marks the fourth consecutive rise in the repo rate, bringing it to 5.9%. This will definitely impact the new and existing borrowers. However, this decision has been made to curb the rising inflation. With India’s inflation rate being 7%, the value of the currency might fall without the intervention of the RBI in order to try and sustain it and bring it down," said HP Singh, chairman &amp; managing director of Satin Creditcare Network. Home loans Let’s look at home loans first. If you have ₹50 lakh outstanding with a bank at an 8.5% interest rate spread across 20 years, the effective EMI you have is at ₹43,391. However, if the 50 basis point hike is passed on to the loan, the EMI will go up to ₹44,986 – an effective increase of ₹595 per month. For every one lakh of home loan for this tenure, the EMI will go up by ₹32. Auto loans The net impact is different for auto loans where the tenures are shorter but interest rates are different. For example if you have a ₹10 lakh auto loan at around 8.6% interest rate for a tenure of seven years, your EMI has been at ₹15,887. Again, in the changed interest rate regime, it would come up to ₹16,140 every month – an effective increase of ₹253. For every lakh of an auto loan for the said tenure, the EMI will go up by ₹25. Personal loans For a personal loan that’s spread across two years, the EMI for a ₹3 lakh loan at 11.4% would be at ₹14,038. After an interest rate reset, it would go up to ₹14,108 — an effective increase of ₹70. Increasing loan tenure? In the last two years, interest rates on loans have gone up by 1.9% – undoing the EMI mathematics of most borrowers. For auto and home loans, borrowers can consider extending their tenures if the burden is higher. However, it is to be noted that extending tenures will increase the interest payable across the years — and especially for large loans like home loans, the net payable will balloon correspondingly. The other factors that play a role in tenure extension would be the borrower’s age – while younger borrowers can afford it, most people must clear off long term loans before retirement age of 60. More hikes ahead? When he announced the rate hikes today, RBI governor <keyword id="6359111" type="General" weightage="20" keywordseo="shaktikanta-das" source="Orion">Shaktikanta Das</keyword> said that the consumer price inflation is still above the central bank’s tolerance level. “Going forward, the RBI will remain vigilant, agile and nimble in its liquidity management operations and would use all instruments at its disposal to mitigate the spillovers of global financial market volatility on domestic financial markets,” said Das. It means going ahead, there could be more rate hikes on the horizon and a lot of experts predict that too. “We continue to expect another 35 bps hike in December followed by a pause with the RBI assessing Fed actions, and impact of past rate hikes on domestic growth and inflation,” said Suvodeep Rakshit, senior economist at Kotak Institutional Equities. Those who have banked on low interest rates offered during the pandemic to take home loans, might have to adjust their monthly math — but the burden of growing interest is what most people across the world have been dealing with and partial prepayments will help if it can be afforded. Since more rate hikes might be coming, it would be a good idea to pay off personal loans if possible as they can get costlier. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/stock-market/news/markets-shrug-off-50-bps-salvo-by-the-reserve-bank-of-indias-as-hike-largely-priced-in/articleshow/94550783.cms">Markets shrug off 50 bps salvo by the Reserve Bank of India’s as hike largely priced in</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/auto/news/tata-tigor-ev-vs-tata-tiago-ev-comparison-of-price-and-features/slidelist/94551771.cms">Tata Tigor EV vs Tiago EV - which one should you buy?</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/india/news/presidential-commission-recommends-stamping-of-h-1b-visas-inside-us/articleshow/94551768.cms">Presidential commission recommends stamping of H-1B visas inside US</a>

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Explained: Is this the right time to invest in long duration debt funds?

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NCDs may offer a higher interest rate than fixed deposits but experts advise caution

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These small finance banks are offering up to 9.5 percent interest rate on FD in 2023

Rahul Verma

Explained: With markets volatile, should senior citizens invest in PSU bank FDs?

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A floating rate fixed deposit can be a good investment, for the next one year

Bhakti Makwana

Here is how much your EMI will go up after the recent repo rate hike

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