Bombay stock exchange (BSE) at the door steps of 28 K and its companies are too close to clock whooping 100 lakh crores . It’s the moment of sheer joy that our country joins the elite club of those countries which are in 100 lakh crores!!!! , so these are the companies whose market capitalization contributions are above 1 lakh crores – ONGC, Axis, HCL, TCS, RIL, Infosys, HDFC, Coal India, SBI, ICICI, Sun Pharma, HDFC, HUL, L&T, Bharti Airtel, Wipro, TATA Motors and NTPC.
Although the Reserve Bank of India has crashed the expectations of the market regarding the rate cut, but still the investors can make the hay while the sun shines by planning right away to make the most of the likely monetary easing over the next two years.
It would be more advisable to for the investors to invest half of their fixed income portfolio in a mixture of long duration funds, gilt funds and tax free bonds which are definitely very well poised to benefit than the falling interest rates.
As per the market’s expectations the key policy rate is to be cut by 75-100 basis points gradually during the next two years and as the interest rates fall the bond prices will move up and therefore the capital of the investors will get appreciated .To make a point clear over here is that the rates and bonds move in the opposite directions.
Even the consumer price inflation has dipped to 6.46% in September which is the lowest since the new series of consumer price inflation was released in January 2012 and so also the domestic fuel prices have dipped as the global crude oil prices have weakened to $82 per barrel inflicts a case for cut in the interest rates by next year, as the cut in diesel prices will bring pluck out the teeth of the inflation. So the long term income and gilt funds will fetch better yields on the ten year benchmark falls and will definitely give the investors a higher capital appreciation in long term and gilt funds. The fiscal deficit number projected by the government would play the main role in the direction of the ten year bond, if the fiscal deficit is on the lower side than what is projected than it would definitely boost up the rally bond market.
Another point to ponder is that when the rates fall the bond funds, gilt funds, tax free bonds with a longer maturity definitely benefit the most. In this bull run the markets are looking into the upward direction the market is too strong to take any hurdle in its strong march striding towards 35,000 and nifty at 10,000.