Debt – A Safe Investment Instrument

“Recession” today has struck everyone in some or the other way. India would not be affected by it in a significant way they say, however, it does have some impact on every individuals life. Things are getting better by the day. The stock market – which usually people believe is the benchmark and decides where the economy is really going, is also doing well from the past few months. This change in the stock market has come in only after the elections. Slowly, as the economy is showing some progress, importance of debt instruments are increasing.

In the month of February, Tata Capital NCD’s (Non – Convertible Debentures) which gave interest returns of around 12% p.a are now beneficial especially in this market. As a Daily Newspaper rightly suggested yesterday on the 29th of July 2009, that Experts have advised investors to stick to existing debt plans interest rates are likely to remain steady in the medium term. In its policy review meeting on Tuesday, RBI has not changed the reverse repo rate, repo rate or the bank rates for that matter. Hence clearly, interest rates can remain stable in the medium term at least.

Another expert advice for investors mentioned was to go in for corporate deposits which are likely to offer higher rate of return than the conventional bank fixed deposits. They are also generally backed strongly. For example, the Tata Capital Issue was backed by Tata Sons. The latest Shriram Transport Issue which has been oversubscribed more than eight times is now the talk of the town.

These debentures are usually tradable on the stock exchange and sometimes come with call/put options. Hence compared to a simple bank fixed deposit, these are quiet liquid. So one now has a safer investment option with guarantees returns and sometimes give nifty participations too.

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