Inflation: Chidambaram’s contribution

Now that the Pay commission recommendation has been accepted, inflation gets a nice leg up :). Now you can see inflation at 12.5% this week and perhaps at 13% the next week. This will increase the interest expectation of the people and therefore the reluctance of people to participate in RBI auctions.

Thus if you have money in savings bank account, rejoice! Keep money in liquid funds / short term floaters (accrual funds instead of duration funds as a fund manager would say). Do not lock in your funds into 36 months FMPs unless you wish to clearly not worry about interest rates in 6 months time. You are better off to keep small amounts in FMPs of a lesser duration. Ideally a short term floater – and in about 6 months time start doing a STP in an equity fund.

So have fun investing…..

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