With 2007 ending with highest annual gains in the indices, and reality sector prices sky rocketing, Investment in Bank fixed deposits are not likely to pick up at least till first two calendar quarters of the year.

Normally investments in fixed deposits pick up only when the alternate returns in stock markets are low. Though prospect of political uncertainty is looming large, yet no political party seems to be prepared for early elections. The stock market boom is likely to continue and Sensex likely to touch 22000 levels by the end of first quarter. In this scenario, investments in fixed deposits is unlikely to compete with these other prevailing investment avenues available to the investor. The investors would have to consider the interest rates, the returns, the lock in period, liquidity and safety, before taking an investment decision.

With public more than keen to finance the corporate sector, the companies are finding it easy and economical to fund their requirements through equity issue or private raising of foreign loans which are available at 200 basis points above libor. Therefore, no bonds or fixed deposits by corporate sector are on the anvil. Only option left to invest in fixed deposit is in Bank Deposits.

These fixed deposits are useful for investors looking to deposit funds for short intervals say about six months. Investments in mutual funds are increasingly being preferred over Bank FDs for such short tenure. As per RBI regulations there will be no interest paid for any premature withdrawals for the period 15 days to 29 or 15 to 45 days as the case may be. In such scenario, investments in mutual funds offer better return and in some cases is the only option.