With the markets swinging wildly over the last couple of weeks due to the rapidly falling oil prices, and the concerns in the Russian and emerging markets, here is the strategy I am going with. I am counting on a reduction in interest rates from the RBI (even though inflation may not go down quickly enough, and there is concern that money will move out of the Indian debt markets if interest rates are reduced) Lower interest rates will mean bond yields will come down, and existing long term bonds will sell at a premium. With this in mind, I am investing in long term GILT funds at the moment, to hopefully profit from an imminent rate cut, and the corresponding capital gains from the GILT fund. The specific fund I am investing in is HDFC Long Term GILT fund.
I am also expecting rate sensitive sectors like banks to do well as rate cuts happen, so I am also invested in banks through the Reliance Banking Fund.
Hopefully the RBI governor of India, Dr Raghuram Rajan, will do me a favor and cut interest rates sometime between now and Feb 2015. Here is hoping for the best.