The Indian equity market has been rather volatile in the last couple of months, with the benchmark indices experiencing steep declines. While the market has finally staged a remarkable rebound in March 2025 (gaining nearly 6%), it would be imprudent to be complacent and think that markets have bottomed out.
The U.S. President Donald Trump’s announcement of reciprocal tariffs, set to come into effect from April 2, 2025, and applying to “all countries” without exception, is likely to continue contributing to market volatility.
In addition, the other global and domestic headwinds, such as persistent geopolitical tensions, Israel’s expansion of the Gaza war, the ongoing Russia-Ukraine war, rising crude oil prices, chances of geoeconomic fragmentation and the possibility of an economic slowdown, are keeping the Indian equity markets on edge.
During such uncertain times, strategic asset allocation and diversification are going to be crucial. A tactical exposure to bank Fixed Deposits (FDs) within debt as an asset class would prove to be a prudent move to navigate market volatility, benefit from an assured rate of return, and add a layer of stability to your, the investor’s, portfolio.
Why Is Now an Opportune Time to Invest in Bank FDs?
In February 2025, the Reserve Bank of India (RBI) cut the repo rate for the first time in nearly 5 years.
One of the key factors behind this decision was the easing of the Consumer Price Index (CPI) inflation, also known as retail inflation, to 4.31% by January 2025 from its peak of 6.21% in October 2024. Now, in February 2025, the CPI has further declined to 3.61%, reflecting the lowest year-on-year inflation after July 2024.
With the inflationary pressure easing, it is anticipated that the RBI will cut the repo rate by another 25 basis points (bps) in the upcoming April 2025 bi-monthly monetary policy.
If this indeed happens, banks would be nudged to lower their deposit rates in response, impacting the returns for depositors. Thus, investing in bank FDs now can help you, the investor, to lock in at the current interest rates and potentially secure better returns before the policy repo rate cut is announced by the RBI in its April 2025 bi-monthly monetary policy statement.
Here’s Why You Shouldn’t Overlook Bank FDs in the Current Scenario
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