New Delhi, Oct. 7 -- The Reserve Bank of India (RBI) has raised the repo rate by 25 basis points, signalling a shift in its monetary policy approach as the central bank balances stronger economic growth with emerging inflationary pressures. The move is important for investors because higher interest rates can affect bond yields, deposit rates, borrowing costs and equity valuations differently.

For retail investors, the key question now is where to position fresh money as the rate cycle changes. Short- and medium-duration debt funds could be relatively better placed, while long-duration bonds may face near-term volatility. Equities could see a mixed impact, with highly leveraged sectors more exposed to higher borrowing costs. Fixed deposi...