More Money In Your Pocket & Five Options To Invest It Wisely | Why RBI's Rate Cut Is Good News

The Reserve Bank of India’s recent 25 basis point cut in the repo rate is prompting a rethink in investment strategy, particularly in the fixed income space. With borrowing costs coming down and the RBI signaling a more supportive stance, investors in debt funds have reason to revisit their portfolios.

According to investment advisory firm Fisdom, this is a good time to consider categories that tend to perform well when interest rates decline. Dynamic bond funds, medium-to-long duration funds, and high-quality corporate bond funds are well-positioned to benefit from falling yields.

Also Read: RBI Cuts Repo Rates By 25 BPS: 4 Things That Will Affect You | Republic World

For more conservative investors, short-term bond funds remain a safer option. They offer low risk and liquidity, making them suitable for those who prefer stability. However, for investors willing to take on a bit more interest rate risk, longer-duration funds could offer better returns over the coming months, Fisdom notes.

Given the RBI’s accommodative stance, financial planners recommend gradually increasing exposure to duration-focused debt funds. A phased investment approach—such as through Systematic Transfer Plans (STPs)—can help reduce volatility while building positions in these funds over time.

Experts advise maintaining a long-term view, ideally staying invested for at least three years, to fully benefit from the potential capital gains that typically come with a falling rate cycle.

With the central bank looking to support growth while keeping inflation in check, the outlook for debt markets appears promising—especially for investors who plan their moves carefully.