Falling FD Returns? Investors Are Shifting to Mutual Funds & Gsecs

Markets Discussions
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With the RBI slashing the repo rate by 50 basis points to 5.5%, fixed deposit investors are in for more disappointment. It’s the third rate cut this year—and while borrowers cheer cheaper EMIs, FD rates have already started their descent, slipping by 30–70 bps since February 2025.

If you’re hoping for stable returns, here’s the hard truth: more rate cuts are likely, and banks will continue trimming FD interest rates. Even large banks now offer just 6.5%–7.5%; for senior citizens, the marginally higher rates may not stay long.

Move Beyond Traditional FDs

Many investors are now rethinking their approach. While strategies like FD laddering can help in managing reinvestment risk, the real alpha lies elsewhere:

  • Debt Mutual Funds – offer better tax efficiency after 3 years and have potential for higher yields.
  • Corporate Bonds & NCDs – for those who can take slightly higher risk, this may offer 8%+ returns.
  • RBI Floating Rate Bonds – relatively safer and offer protection in rising inflation scenarios.
  • Small Finance Banks – still offer 8%+ rates but come with caps on insurance coverage (₹5 lakh limit).

The FD window with 7%+ rates is closing fast, and smart investors are diversifying now.

With FDs falling behind, where are you reinvesting your gains?

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I never parked my money in FDs…:grinning:

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Sir, your style of investing and trading is way different i have ever came across :slight_smile:

4

Probably Dhan should look at the Auto sweep for the money in the trading account. Of course, with the user’s consent :smiley: .

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I’d like to share a fun fact. I looked at my horoscope a long time ago. My:

  • 5th house – speculation, stock market
  • 10th house – career, vocation
  • 11th house – gains

are strong, and the lord of the 5th and 10th houses are in the 11th house. All this suggests a good probability of making money from the market, so I never considered fixed deposits (FDs) that can’t beat inflation. :slightly_smiling_face:

Besides, I started trading in 2007, and then came 2008. Nifty tanked nearly 60%, and so did my early investments. Therefore, I experienced both the bull market euphoria and the bear market desperation early on. I thought trading was better than investing in stocks.

I also discovered Richard Dennis and his rule-based method of trend following right at the start of my trading journey. I liked it, tried a similar philosophy, and it started working. Hence, I have a special love for trend following. In the high transaction charge regime that we operate in, trend-following systems that take fewer trades and capture phenomenal moves are one lucrative way to trade the market.

By custom coding for clients and myself—trying (backtesting and seeing them in live) several strategies and variants, I also gained some deep insights into what works best in the market for trading.

So yes, I am a bit different from the crowd. :slightly_smiling_face:

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