If not equity, corp FDs offer 1-1.5% over debt MFs and banks

For investors looking to cut exposure to equities amid wild swings, corporate deposits with higher credit ratings could be good alternatives to debt mutual funds and bank deposits. Wealth advisors said deposits from top finance companies like Bajaj Finance and Shriram Finance offer over 100-150 basis points more than bank deposits and debt mutual funds. One hundred basis points is 1%.“One of the best options for investors to earn higher interest than banks with good safety is by investing in corporate deposits, where investors have many choices,” said Vijay Kuppa, CEO, InCred Money.

For example, a fixed deposit of Bajaj Finance pays 8.6% for a 42-month period, while Shriram Finance pays 8.7% for a three-year deposit. Senior citizens can earn 25-50 bps more than this. A fixed deposit from SBI pays 7% for a two-three-year tenure. Most debt mutual funds are returning 7-5%% on an annualised basis

While debt mutual funds offer higher liquidity, they do not offer fixed returns and with no indexation benefits available, they no longer find favour with conservative investors, including retirees who often look for visibility and assured returns.

Distributors also believe that deposit rates have peaked and could head lower over the next few months.

“There is a chance that interest rates can come down by the end of the year. Investors can use these deposits to lock in at higher rates,” says Nikhil Gupta, founder, Sage Capital. He recommends deposits of Shriram Finance and Bajaj Finance given their strong financials, track record and high rating of these companies.