Skip to main content

Reason why interest rate fluctuates?

A loan to purchase or build a house is available at around the 10 percent level. It used to be around seven percent a couple of years ago. Also, the interest rates remained quite volatile over the last few quarters. However, this is a cyclical phenomenon. Over a long loan tenure, it will move upwards and downwards. The average rate and tax incentive together add up to make it good for the borrower.


Here are some factors that influence interest rate movements:


Inflation


Inflation plays a significant role in influencing the monetary policy of the Reserve Bank of India (RBI). It forces the central bank to hike the interest rates. Currently, inflation has gone up over 11 percent (way above the RBI's mandated inflation level of around five percent per annum). The main reasons for this high inflation rate are a sharp rise in prices of basic commodities, and hike in rates of petroleum products (petrol, diesel and cooking gas). The RBI has announced a repo rate hike twice this month itself to control the rising inflation level. This repo rate hike makes funds costlier for banks and as a result interest rates are quoting high and are expected to go even higher in the coming weeks. However, experts believe that the rates will not go up very significantly as high interest rates have an adverse impact on the growth rate of the economy.


Liquidity


The liquidity in the system is another parameter that influences interest rate movements. Liquidity influences the cost of acquisition of funds for banks. If liquidity is low, cost of raising funds will increase, and hence, they will need to raise the interest rates on their lending. There are many factors that influence the liquidity in the system. Fund inflows from foreign investors and a cut in the cash reserve ratio (CRR) increase liquidity in the system and vice versa.

Popular posts from this blog

Axis Mutual Fund NFO - Axis Fixed Term Plan Series 18

Axis MF has announced that the NFO period of Axis Fixed Term Plan Series 18 (15 Months) under Axis Fixed Term Plan Series 17 19 has been preponded from February 27 to February 24.        --------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.   Invest Tax Saving Mutual Funds Online Tax Saving Mutual Funds Online These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)   Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications   These Application Forms can be used for buying regular mutual funds also   Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds ) HDFC TaxSaver ICICI Prudential Tax Plan DSP BlackRock Tax Saver Fund Birla Sun Life Tax Relief '96 Reliance Tax Saver (ELSS) Fund IDFC Tax Advantage (ELSS) Fund SBI Magnum Tax Gain Schem...

Budget 2014 Highlights for Saving

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   The new finance minister Arun Jaitley has just presented his first budget. What measures does the budget contain that will specifically impact savers and investors? Here they are: 1. Housing loans exemption for self-occupied properties increased to Rs2 lakh: Earlier this amount was Rs1.5 lakhs. This move barely keeps pace with the inflation in asset values.   2. Investment limit under 80 (C) increased to Rs1.5 lakh: This is a good move again and offers some relief to taxpayers.   3. IT exemption increased to Rs2.5 lakh, Rs3 lakh for senior citizens. This comes as a minor relief for taxpayers.   4. Annual PPF ceiling to be enhanced to Rs1.5 lakh, from Rs1 lakh: This is in tune with the change in 80C.   5. Long term capital gains tax for debt funds has been rai...

Franklin India Taxshield

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   This fund maintains a quality portfolio of large-cap orientation. The fund manager adheres to a bottom-up investment approach and looks for companies whose current market price does not reflect future growth prospects. Investments are in companies that can drive future earnings growth. Stocks are selected based on the company's financial strength, management's expertise, growth potential within the industry, and the industry's growth potential.   The portfolio is well-diversified across sectors and market capitalisation and follows a blend of value and growth style of investing. The fund follows a predominantly large-cap allocation of over 70 per cent, with small-cap allocation never exceeding 10 per cent since inception.   Performance The fund doesn't dev...

ELSS Funds for different Risk Profile

Match your Goals Risk Profile With ELSS Investment   DIFFERENT TRACKS Unlike funds with a clearly defined investment universe -- large-cap, mid-cap or multi-cap - Tax Saving Schemes do not specify investment focus If you are looking for an equity Linked Savings Scheme (ELSS) to pare your tax burden, the plethora of options may confuse you. Many investors simply opt for ELSS funds , also called tax saving schemes with the best return over a certain time period. However, this may not yield the best results. There are several types of ELSS funds and it requires a nuanced approach to pick the right one. DIFFERENT RISK PROFILES Unlike funds with a clearly defined investment universe -- large-cap, midcap or even multi-cap schemes in the ELSS category do not specify their investment focus. While these schemes have the flexibility to invest anywhere, most tend to follow a defined template. For instance, some funds take a distinct large-cap tilt with a limited exposure to mid or small-cap st...

Reliance Tax Saver Fund Online

Invest in Reliance Tax Saver Fund Online   ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saving Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in india for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Franklin India TaxShield 4. ICICI Prudential Long Term Equity Fund 5. IDFC Tax Advantage (ELSS) Fund 6. Birla Sun Life Tax Relief 96 7. DSP BlackRock Tax Saver Fund 8. Reliance Tax Saver (ELSS) Fund 9. Religare Tax Plan 10. Birla Sun Life Tax Plan Invest in Best Performing 2016 Tax Saver Mutual Funds Online Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot] Com OR Leave a mis...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now