Arvind Chari, fund manager, Quantum Mutual Fund advises investors looking for investment options to consider debt instruments like fixed deposits (FDs) and fixed maturity plans (FMPs). He expects interest rates on FDs and market instruments for 1-3 year to remain stable at over 9%.
"We believe that given that the deposit growth rate is weak, banks would be unable to cut deposit rates despite any eventual repo rate cuts," he said in an interview to moneycontrol.com.
Further, he doesnt see the central bank slashing interest rates in the upcoming monetary policy. "We believe that rate cuts are possible only on some rupee appreciation; sharp fall in oil prices and drop in food prices or a combination of these three in different measures," he added.
Meanwhile, Chari is optimistic that the government will be able to accomplish the fiscal deficit target. "Given that this years numbers were made with tax increases and not expenditure cuts, we believe that the chances of the Government achieving are far higher and credible than last years," he elaborated.
Below is the edited transcript of Charis interview with moneycontrol.com.
Q: Is this a good time to be investing in debt schemes, considering there is a higher probability of interest rates declining from hereon? Also, what is your outlook on interest rates over the next 3 months?
A: For investors, investing in FDs and FMPs, has been a good option for the last 2 years and it continues to remain so. Interest rates on FDs and market instruments for 1-3 year are stable at over 9% and are likely to remain so.
We believe that given that the deposit growth rate is weak, banks would be unable to cut deposit rates despite any eventual repo rate cuts. Hence, fixed deposits and FMPs should continue to remain attractive in the 1-3 year segment.
On interest rates, we do not expect any rate cut by the RBI in the July policy. We believe that rate cuts are possible only