Due to COVID-19, we are going through unprecedented times. There has been a paradigm shift in the way we are doing things. Would you ever believe beginning of year 20-20, that this would turn out to be such an incredible year; turning all our typical "My Way of Life" beliefs upside down!!! I am not going to go into the negatives of it as it reminds be famous quote of Sir Issac Newton. It says "Stay away from negative people, they will find a problem to every solution"
So to give you a perspective on overall economic outlook. Aug 2020 had recorded USD 9 Billion of FPI equity inflow. This has driven valuations to non justifiable levels. It should correct itself soon again triggering mayhem on Dalal Street. This coupled with government subsidies during COVID time, is going to weaken the economy.
This is for sure going to impact the credit side of market and potentially more and more companies defaulting on the liabilities payment.
Have I made to re-think your investment decision or added to your woes? So, in these uncertain times if you are looking to invest, what is the most appropriate avenue for a risk averse investor like me? Do we have any options? Typically we look at Safety, Liquidity, Returns (SLR) while making investment decisions.
Let me remind you that the safest bank in India, SBI, is offering 5.1% on 2 Year FD. NBFCs like HDFC and Bajaj Finance are offering 125 basis point more that this, so @ 6.35%. This is going to have some degree of credit risk involved. What option I am proposing today is a virtually credit risk free instrument and providing better returns than these options but you may have to forgo liquidity.
Reserve Bank of India (RBI), recently launched RBI Floating Rate Bonds. Don't you believe, yes RBI, that's why I said zero credit Risk!. This bonds offer a coupon of 7.15% and is a floating rate bond in nature.
Let us look at salient features:
This option gives you a better post tax returns in which ever tax bracket you are in compared with the safest Bank's returns.........So in uncertain times there are options where there is certainty on returns!!!😀
How to invest:
with ICICI Direct you can invest online or contact any of the RBI appointed intermediaries for investment (State Bank of India, Axis Bank Ltd., ICICI Bank Ltd.,HDFC Bank Ltd., IDBI Bank Ltd. etc) to start investing!!
with ICICI Direct you can invest online or contact any of the RBI appointed intermediaries for investment (State Bank of India, Axis Bank Ltd., ICICI Bank Ltd.,HDFC Bank Ltd., IDBI Bank Ltd. etc) to start investing!!
Note: please feel free to comment ot drop me a note with your candid feedback on Sudarshan.Rajhansa@gmail.com
