Stocks Dropping, Interest Rates Falling; Where To Invest Now?

Stocks prices have been dropping and interest rates have fallen 200 basis points in 2-years. Where do you invest now?

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It has not been the best years for investment in any asset class in 2016. The Sensex is up just about 2 per cent, since the start of the year. Individual stocks may have yielded more returns or losses, but, based on the Sensex, the returns are poor. Bank interest rates, which were around 8 per cent at the start of the year, are around 7 per cent now. Gold has been the best asset class with returns of around 24 per cent this year. This brings us to the question: where to invest now?

High yielding interest of company deposits

One should seriously look at company deposits, as bank interest rates have fallen sharply. There are many company deposits that offer you interest rates near 8-9 per cent, with yields that can go as high as 10 per cent. However, you need to look at the AAA rated deposits only, as company deposits are not very safe. We have selected a few company deposits for you that are relatively safe.

DHFL Ashray Fixed Deposit

This is a AAA rated deposit, which offers an interest rate of as much as 8.60 per cent on its 13-month deposit. The 4 and 5 year deposit of the company gives an interest rate of 8.65 per cent, which should take the effective yield near the 10 per cent mark, on such a higher duration. The deposits are relatively safe as DHFL is among the top housing finance companies in the country. This is not a bad bet, when considering that most banks offer an interest rate of 7 to 7.25 per cent.

Mahindra and Mahindra Financial Services

The FDs of Mahindra and Mahindra Financial Services fetch an interest rate of 8.05 per cent. This is way better than what bank interest rates offer. Again, this is a AAA rated deposit and considering that most investments, including shares are not offering any returns, it is not a bad idea to stay invested. The yields over a longer period of time, would stay higher.

Shares of Coal India

Take a look at the few high dividend yielding company shares. They offer good dividend yield of around 7-8 per cent. A classic example, is Coal India, where the dividend yields of the company are at 8.45%. In times of low interest rates and when bond yields are falling, it is not a bad idea, to buy high dividend yielding stocks.

PPF

The Public Provident Fund is not a bad bet. The interest rates are the highest at 8.1 per cent, which is pretty decent. Now, there are a few other reasons why we have suggested the Public Provident Fund. You get tax benefits under Sec 80C of the Income Tax Act, as well as the interest is exempt from Income Tax in India. This is your best option in terms of interest and post tax returns.

Listed NCDs

Listed NCDs are not a bad bet, if you are able to get them at the right price. Some NCD prices have gone higher, resulting in lower yields.

 

 

Read more about: stocks, interest rates
Story first published: Tuesday, November 15, 2016, 5:14 [IST]
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