How rising bank FD interest rates a challenge for stock market, mutual fund investors?3 min read 22 Oct 2022, 07:16 AM IST
Stock market and equity mutual fund investors need to look at debt funds for diversification of portfolio, believe wealth management experts
Portfolio management: Amid hawkish Reserve Bank of India (RBI) on interest rate hike, various Indian banks have announced fixed deposit (FD) interest rate hike in last few months. The State Bank of India (SBI) recently announced up to 80 bps FD rate hike whereas Canara Bank declared up to 135 bps retail FD rate hike. Apart from them, HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank are among those lenders that have hiked interest on term deposits recently. Today two state-owned banks, Canara Bank and Union Bank of India, offer 7 per cent fixed deposit interest rate. So, traditional bank FD rates are expected to attract those investors who had moved to equities in post-Covid stock market rebound. However, rising bank term deposits are not going to make mutual funds and direct stock investment less attractive. But, from portfolio diversification perspective, it would definitely bring some challenge for the equity investors as debt mutual funds are expected to regain its shine during high bank interest rate regime.