Why GILT funds are still lucrative?


December 22, 2008 6:43 PM

Dear Investor

IN my last week mail on “Bull markets returns in Bear market”, I advised to remain invested in GILT funds. PL go through the attached presentation to find, how hard and steep interest rate cuts, central banks of developed and emerging countries have executed?

Reasons on why India will have to axe interest rates further.

  1. India is behind the curve, most of the developed and strong economies are now near to zero interest rates, India is last in the list and base rate is still as high as 6.50 %
  2. As election approaches near, to offer loans at lower rates to attract the voters coupled with weak economy, rate cuts can not be ruled out.
  3. Inflation and commodity prices have come down sharply forcing further aggressive rate cuts to stimulate the economy
  4. Lowering interest rates is the first instrument used along with stimulus packages to prompt the economy, hence further tinkering is inevitable.

Therefore, I believe there are still opportunities to earn higher return investing in safest instruments. Stay invested.


Dhaval Shah

AVP | PINC | Baroda | 09825528815


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