Market Downturn: Is This the Right Time to Invest in Fixed Deposits?
May 01, 2025

Stock market investors have a problem. The Sensex tumbled nearly 3,000 points at the end of 2024. Foreign investors, wary of weak earnings, pulled back. In fact, as per reports, in November 2024, 79 out of every 100 new SIPs were discontinued. The weakening rupee and rising inflation (forecast – 4.8%) have further added to investor worries. In such uncertain times, it’s essential to diversify your portfolio to keep your investments safe. This is where investing in fixed income instruments like Fixed Deposits (FDs) could help.
Why Invest in Fixed Deposits?
1. Stable Returns
Fixed Deposits are not market-linked products, meaning your returns are unaffected by market volatility. The interest rate remains fixed throughout the tenure. That said, if you decide to break your FD before maturity, you may incur penalties or lose out on the promised rate. Read our detailed explanation on premature withdrawal of FDs.
2. Higher Interest Rates
It’s a myth that FDs offer low interest rates. For example, Ujjivan Small Finance Bank offers up to 8.25%* p.a. interest rates on Fixed Deposits. Senior citizens can enjoy additional 0.50%* interest rate over standard rates.
3. Tax-Saving Benefits
Tax Saver Fixed Deposits allow you to avail tax deductions up to ₹1.5 lakh under Section 80C of the Income Tax Act, 1961. These FDs have a lock-in period of 5 years, meaning you cannot break your FD within the stipulated time.
4. Power of Compounding
We have already spoken about how FDs provide stable returns. Now let’s understand how FDs help maximise returns through compounding. In simple words, compounding allows you to earn interest on interest. When interest is compounded periodically and reinvested along with the principal, it leads to exponential growth of the investment over time. You can read more about it here.
5. Helps Create a Regular Income Stream
In terms of interest pay-outs, there are two types of FDs – Cumulative and Non-Cumulative Fixed Deposits. For Cumulative FDs, the interest is paid out at the time of maturity, whereas for Non-Cumulative FDs, interest is paid out periodically – monthly, quarterly, half-yearly or annually. Non-Cumulative FDs are particularly attractive for investors seeking regular interest income.
6. Flexible Tenure and Liquidity
Fixed Deposits come with flexible tenure options, ranging from 7 days to 10 years. This flexibility allows you to align your investments with your financial goals. Additionally, FDs offer better liquidity compared to other fixed income schemes like PPF (Public Provident Fund). That said, the liquidity option is available only for Callable FDs. Also, it is generally recommended not to break your FD before maturity so that you can enjoy optimal returns.
7. Up to ₹5 Lakh of Your FD Investment Insured
Each depositor is insured up to ₹5 lakh per bank under DICGC (Deposit Insurance and Credit Guarantee Corporation). The amount includes both the principal and interest, offering a safety net to your investment.
Should You Consider Investing in Fixed Deposits Amid Market Volatility?
Amid the growing market volatility, investing in Fixed Deposits (FDs) is not just an alternative but a necessity for safeguarding your wealth. With stock markets frequently swaying due to global uncertainties and economic fluctuations, FDs offer a reliable way to insulate your finances from the vagaries of unpredictable market conditions.
Unlike equities, which can be subject to sharp and sudden dips, FDs provide a fixed and guaranteed return, ensuring financial stability even in turbulent times. They act as a buffer, offering peace of mind that your capital remains secure while earning steady interest. In an environment where market unpredictability is becoming the norm, FDs stand as a pillar of consistency and safety for prudent investors.
Final Thoughts
Fixed Deposits continue to be a trusted and dependable investment vehicle in India. Their capital safety, backed by DICGC insurance, combined with guaranteed returns, flexible tenure, and liquidity options, make them ideal for both conservative and balanced investors. The power of compounding further enhances long-term wealth accumulation, making FDs a compelling choice for those focused on steady financial growth.
Looking to grow your savings faster? Ujjivan SFB offers a wide range of fixed deposit products. Select the FD of your choice and take a step forward to your financial goals. Alternatively, you can browse through Ujjivan SFB product suite - our wide range of financial products are designed to make your financial life better.
FAQs
1. How do Fixed Deposit interest rates compare to the stock market?
Fixed Deposits provide stable and predictable returns, unlike the stock market, which can be volatile. While the stock market offers potential for higher returns, it also carries higher risk. FDs are ideal for conservative investors seeking security.
2. Can I withdraw my Fixed Deposit before maturity?
Yes, you can withdraw your FD before maturity, but you will incur a penalty or reduced interest rate. It is advisable to only break your FD in case of an emergency.
3. What is the tax implication of Fixed Deposits?
Interest earned on Fixed Deposits is taxable under the Income Tax Act. 10% tax is deducted at source (TDS) if the interest exceeds ₹40,000 (₹50,000 for senior citizens) in a financial year. However, Tax Saver Fixed Deposits offer tax deductions under Section 80C, subject to a 5-year lock-in period. Please note that this TDS exemption on FD interest is applicable for FY 2024-25 (till March 2025). For FY 2025-26, the current TDS exemption limit has been hiked to ₹50,000 for regular citizens and ₹1 lakh for senior citizens.
4. How can I maximize returns on my Fixed Deposit investment?
To maximize returns, consider choosing a longer tenure and opting for compounding interest. Reinvesting the interest earned rather than opting for regular payouts can also boost the growth of your investment over time.
5. How can I open a Fixed Deposit with Ujjivan Small Finance Bank?
You can open a Fixed Deposit with Ujjivan Small Finance Bank either online or by visiting a branch. The bank offers various FD schemes with flexible tenures, competitive interest rates, and special rates for senior citizens.
6. Are Fixed Deposits a good option during market uncertainty?
Yes, Fixed Deposits are an excellent option during periods of market uncertainty. Since FDs are not affected by stock market fluctuations, they offer a safe and predictable return, making them suitable for risk-averse investors looking for capital preservation.
7. Can I have multiple Fixed Deposits with the same bank?
Yes, you can open multiple Fixed Deposits with the same bank, either under different schemes or with different tenures, to align with your financial goals. Each FD will earn interest based on its tenure and interest rate.
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