Rejig your portfolio to gain from a rate cut

Traditional investors in debt (everyone who puts money only in fixed deposits, bonds and debt mutual fund schemes) have a crucial week ahead. The Reserve Bank of India (RBI) policy review is scheduled on Thursday, followed by the Union Budget on Friday. The outcome of these events would set the tone for the interest rate environment in the economy for the near-term. Sure, the central bank spoiled the suspense by an unexpected reduction in the cash reserve ratio (CRR) last week, and a rate cut looks less likely this week. Still, there is a consensus among investment experts that we may be moving towards easy rates and investors should recast their portfolios taking this into account. "We could see a repo rate cut of 100 basis points (1%) in phases over the next 12 months. Investors should align their fixed income portfolios towards medium- and long-tenure products to benefit from the fall in interest rates," says Deepak Punjwani, head of debt markets at GEPL Capital. Fine Tune Your portfolio "Have 75% of your debt portfolio in bank fixed deposits with a maturity of up to three years, and the balance 25% in dynamic bond funds," advises Vishal Dhawan, founder, Plan Ahead Wealth Advisors. However, choosing a fixed deposit could be tricky..