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Do you expect interest rates to go up post-March'21? If so, which type of fund should I switch to?

While making investment decisions, focus on the factors that are in your control, says Ashutosh Gupta

Due to the loss in equity funds during the COVID-19 period, I switched to banking and PSU and short-term bond funds. Low interest rates may prevail up to March 2021. So, do you expect the interest rate to go up after that and if so, which type of fund should I opt for to get reasonable returns without any loss?
- Bala K

Well, I'd say that it's very difficult to predict the trajectory, as well as the direction of interest rates with precision. If you look at the current state of the things, there are forces and counterforces. So, on one side, the RBI has clearly communicated its preference for a continued accommodative stance, which it wants to carry well in the next financial year. But on the flip side, inflation has been at an elevated level and it's been quite sticky. Also, economic growth has been better than expected. So, there are lots of factors at play here and it would be very difficult for anybody to predict interest rates with any degree of precision.

This really brings me to the broader point that while making your investment or asset-allocation decisions, you should be far more focused on factors that are in your own control rather than basing these decisions too much on macro-economic factors. So, you should really be focusing far more on factors like your goals, your time horizon, your risk appetite and these things would throw up more definitive answers about where you should be investing and what your asset allocation should be. That's really how you should go about it.

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