Invest Short, Stay Safe

One of the fastest-growing economies in the world may be staring at a recession for the first time in the last four decades. In fact, experts are even talking about a Great Depression ahead for India. These telltale signs are enough to cause panic among debt investors, already hit by the IL&FS default debacle. Interest rates, too, are on a decline, and are pulling down yields or returns. Real rates are already in the negative zone because of higher inflation and lower interest rates. The Reserve Bank of India (RBI) is also stressing on growth by reducing interest rates to support demand. “This situation of negative real interest rates is going to stay for some time,” says Rajesh Cheruvu, Chief Investment Officer of Validus Wealth, a wealth advisory firm.

There is likely to be one more rate cut of 25 basis points (1 basis point is one hundredth of a percentage point) in the near future. The balance sheets of the two big issuers of debt — the government and the corporate sector —