Higher returns in the short term

As a result of the current global situation, peculiarities in the Indian domestic financial scenario, tightness in the liquidity, call rates (rates at which banks borrow between each other) closed substantially higher at 14.0-14.5 per cent, against the previous close of 11.5-12.5 per cent. The rates touched an intra-day high of 15-15.5 per cent signalling tight liquidity in the market.

As a result of the same, one should try and put short term money in liquid mutual funds as against fixed deposits as the returns are higher even after considering the taxes that one should pay. This squeeze in liquidity is expected to be prevalent for some time to come and hence my advice is to park your excess short term money in Liquid mutual funds and ride the wave of higher returns.