Lock into prevailing FD rates before further decline

The Reserve Bank of India (RBI) on Thursday lowered the repo rate by 25 basis points to 5.25 per cent, taking the total reduction in 2025 to 125 basis points.

- SANJAY KUMAR SINGH

Now that the regulator has ushered in a relatively low-rate phase, fixed-income investors should avoid knee-jerk reactions and respond in a well-thought-out manner to this regime.

Will rates be cut further?

Fund managers broadly agree that the RBI is nearing the end of the current rate-cut cycle.

"The scope for aggressive easing is limited. Inflation is near record lows now. But we believe that the RBI may focus on one-year forward inflation, which is expected to rise modestly due to base effects and food price normalisation, though GST cuts should keep it contained," says Devang Shah, head - fixed income, Axis Mutual Fund.

Sneha Pandey, fund manager - fixed income, Quantum Asset Management Company (Quantum AMC), also expects 5.25 per cent to be the terminal rate in this rate cut cycle in the base case scenario.

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