With interest rates and bond yields still offering attractive entry points, investors face an important choice between fixed deposits, direct bonds and debt mutual funds.
Sandeep Yadav, Head – Fixed Income at DSP Mutual Fund, believes tax efficiency should be a key part of this decision.He highlights how direct bonds offer long-term capital gains benefits but limited scope for capital appreciation, while debt mutual funds provide the advantage of deferred taxation.Yadav also points to income-plus-arbitrage and certain hybrid funds as potentially more tax-efficient options for long-term investors.In an interaction with Kshitij Anand of ETMarkets, he also shares his outlook on interest rates, the case for locking in yields now, and how investors could deploy ₹1 crore in fixed income over a three-year horizon.
Edited Excerpts –Q) What is your take on the MPC policy meeting outcome?
Do you see interest rates going higher or lower in the near term?A) The RBI's decision was along expected lines.
Given the uncertainties surrounding the Iran conflict and monsoon patterns, the RBI had little choice but to wait and watch the data.Looking ahead, we expect their next move to be a rate hike.
