Gilt Funds
Gilt Funds invest solely in bonds issued by the Government, and hence are considered the most default risk free bonds. Strangely, Indian Government bonds are being bought by FII’s so much that they are about to hit the upper limit but domestic investors are not showing that much enthusiasm.
With the benchmark 10 year bond at 8%, it would be better to start investing in Gilt Funds now with a 1-2 year time frame. If the interest do co ntinue to move up as expected one can average the purchase at 8.5% and then at 9% again. The returns at 8% is good (pre tax, pre expenses) if the interest rates fall by any chance due to some global / local events the returns could really be great.