RBI has increased the repo rate by 25 basis points to 6.50%. The 10 years G Sec stands at 7.34%.
We believe that this is quite close to the peak and investors are better off locking their investments in medium to long term debt funds.
RBI looks mindful of controlling the inflation aggressively besides providing cushion to rupee against the dollar. In the last year, the dollar has appreciated by around 11% so there is a need to protect any further slide for the rupee.
Inflation is projected at 5.3% for FY 2023-24 which is still higher than the target figure of 4%. Thus, RBI is likely to maintain its vigil and caution.
Still, we believe that further increase in the interest rate cycle is limited. Historically when 10 Years G Sec is around 7.5% level, investors made good returns in the next 2-3 years. So, the investors can consider this to be a good opportunity to invest in short to medium term and even in longer term debt funds and reap good benefits.
We are also of the view that any investment planning should be done on the basis of proper asset allocation. One should diversify his/her portfolio in equity, international equity, debt and some in gold. External market situation keeps changing depending upon various macro and micro economic situations which may warrant some tactical shift in the portfolio. But the core strategic portfolio does not require frequent changes based on ever changing market conditions.
We always believe that investment portfolios should be internally driven rather than influenced by external factors.
Manoj pandey
CFP
