India, July 20 -- 1. With interest rates expected to soften, are debt mutual funds becoming an attractive alternative to traditional fixed income products like bank FDs? How should investors evaluate this shift?

Interest rates are not expected to soften. Yields have shot up in the last 4 months due to the West Asia conflict and that is expected to come down once there is peace and shipping restrictions are removed.

In a falling rate scenario, Debt MFs provide an opportunity for capital gains apart from the accrual, which may be higher than the bank FDs, where the rate is locked once the money is invested.

Mutual funds provide an exit opportunity to the investors considering the majority of the funds don't have an exit load, whereas in ...