Oct 17, 2016 2 min read

Inflation Falls to 4.31%! Know How Your Investments are Affected

Changes in inflation causes variations in one’s investment programme. As there is a change in the inflation rates in the month of September 2016, know how you have been affected by the same, and how you can protect yourself further.
Market fluctuations have a direct impact on mutual fund investments. As the rate and market value of the securities or instruments changes, it leads to a variation in the returns generated on investment. The inflation numbers have a cumulative effect on the economy from consumers’ expenditure to investment cycle to the policies of governments.

As per the latest news on Friday, October 14, 2016, there is a fall in the retail inflation rate in the month of September. It has reached a level of 4.31% from 5.05% in August and 6.07% in July. Accordingly, the experts are of the view that here shall be rate cuts until December 2016 by RBI in order to liberalise the policies. Beyond that, an individual investor needs to know, how his/her investment has been affected by this fluctuation. So, let us understand the impact and the benefits that one will avail from the change in the retail inflation rate.

The prevailing inflation rates in the market have a major say while deciding the interest rates for the investments by the policy makers. For the investors, it is the time to take a smart move so as to make their investments productive and result oriented. According to various analysts and researchers, a better way to do so is, by being focussed on the parameters including diversification, low cost, tax-aware investment portfolio. In addition, one needs to rebalance the portfolio on a regular interval so as to take advantage of every healthy fluctuation.

As we have seen a decline in the inflation rate, Consumer Price Index(CPI) has shown the signs of reduction in prices and hence the chances of a further rate cut has increased in the current fiscal year. Accordingly, the fixed income securities would be performing better in the current scenario by offering extraordinary returns. The reason being is that the prices of fixed income securities are inversely proportional to the interest rates. Declining interest rates shall lead to fall of yields in fixed income securities, which shall further lead to a rise in the NAV of Debt Funds. Hence, the investors who have their investments majorly in the debt funds shall be mostly benefited with this fall.

Yes, it is no wonder to say that inflation can cause tremendous changes in one’s investment. This is the reason we are told to make an investment in such securities which have protection against inflation. There are various schemes as recommended by our experts which fall under the inflation-protected bracket and fall under the mid-cap and diversified equity categories. Some of them are Birla Sun Life Pure Value Fund, Franklin India Prima Fund, ICICI Prudential Value Discovery Fund and SBI Magnum Multiplier Fund. You can buy any of them to make a productive and risk-free investment.

MySIPonline has always helped its clients in managing their investments effectively. Although, there are various factors that have an impact on the portfolio of investors, but we have a wide range of solutions for the same. You must get associated with us to experience the best services!