As equities wobble, bonds shine brighter: why is fixed income regaining favor with risk-averse investors
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A safe haven amid uncertainty
Investor Takeaway: Balance is back
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As global and domestic equity markets turn choppy amid geopolitical tensions, rate uncertainties, and trade disruptions, a growing number of investors are turning their gaze towards stability—and fixed income is quickly emerging as the answer.'For many investors, especially those with a lower risk appetite, the recent equity market swings have been unsettling,' said Kush Gupta, Director at SKG Investment & Advisory. 'This is a good time to look at bonds and fixed income instruments as a way to bring balance and stability to your portfolio.'According to Gupta, fixed income instruments such as corporate bonds, debt mutual funds, and debentures are becoming especially attractive in the current macroeconomic setup. 'We always tailor debt allocations based on the client's age, income, and risk profile. But today, even for aggressive investors, the market is signaling a need to rethink asset allocation,' he told ETMarkets.Gupta added that with expectations of further rate cuts and continued geopolitical risks, locking into fixed return opportunities for 24–36 months makes strategic sense. 'India's strong fiscal discipline and RBI's effective currency management are making Indian bonds more appealing—both to domestic and foreign investors.'Backing this trend, Avnish Jain, Head – Fixed Income at Canara Robeco Mutual Fund, pointed out that the RBI's recent 25 bps rate cut and shift to an 'accommodative' stance mark the beginning of a meaningful monetary easing cycle.'With inflation softening and growth moderating, the policy environment is becoming favorable for debt instruments,' Jain said. 'In the short term, ultra-short and short-duration funds offer attractive opportunities as shorter yields are expected to decline faster. For long-term investors, gilt funds, dynamic bond funds, and income funds are well-positioned to benefit from the falling interest rate trend.'Jain emphasized that with a projected 75–100 bps of rate cuts in the coming quarters, duration strategies are especially well-suited for those seeking capital appreciation with manageable risk.Adding another layer of perspective, Sujan Hajra, Chief Economist and Executive Director at Anand Rathi Group, said that while fixed income may not always offer the highest returns, its role in reducing overall portfolio volatility cannot be overstated.'For conservative investors or those nearing retirement, fixed income provides much-needed predictability and peace of mind,' Hajra said. 'Running yields in the bond market could hover between 7% and 9% over the next year, which is quite attractive considering the current environment.'That said, Hajra added a note of caution: 'While fixed income brings stability, investors focused on long-term wealth creation should still have exposure to equities, which offer higher returns over time—even after adjusting for risk.'Whether you're a retiree looking for regular income, a first-time investor seeking safety, or a market-weary equity investor in search of stability, now may be the time to give fixed income another look.As Kush Gupta sums it up: 'When markets are volatile and uncertainty is high, fixed income offers a much-needed anchor for your portfolio. It's not just about safety—it's about making smart, strategic choices in changing times.': Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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