Mint Money Compass | Higher rates, falling markets: What it means for your money

Summary

From RBI rate hikes and market volatility to retirement healthcare and travel insurance, here's what matters for your money

The Reserve Bank of India's (RBI) latest monetary policy review marks a shift to "calibrated tightening", with a 25-basis-point increase in the repo rate to 5.50%. The repo rate is the rate at which RBI lends to banks; an increase typically pushes up lending rates. The widely anticipated move comes as inflation inches upwards and interest rates rise globally. Further hikes remain possible.

For households, borrowing is set to become costlier. Existing borrowers with floating-rate home loans can expect higher rates when their loans reset. The impact may not show up immediately in monthly payments because lenders typically extend the repayment period to keep EMIs unchanged. But a longer tenure further increases the total interest outgo. If your budget allows, opting for a higher EMI can help contain that cost.

Shipra Singh explains what rising rates mean for your loans and investments. Also read Joydeep Sen's analysis that suggests that deposit rates may take longer to rise: surplus banking liquidity gives banks little incentive to attract fresh deposits.

And finally, should investors rethink their portfolios? Dhirendra Kumar of Value Research sees little reason to overhaul if the rate-hike cycle remains shallow and growth holds up. Maintaining an appropriate asset allocation remains key.

Stay invested

And this is also why the recent market correction shouldn't give you nightmares, but just another reason to get your asset allocation aligned to your financial goals. Equities are under pressure from rising global bond yields, expensive crude oil, monsoon concerns and persistent foreign investor selling. Higher oil prices fuel inflation, inflate India's import bill and put pressure on the rupee, adding to investor unease.

Yet the fund managers Jash Kriplani spoke to remain positive about India's underlying economy. The correction has also made large caps more attractive: the Nifty 50 trades at roughly 17 times forward earnings, nearly 11% below its ten-year average. Yet, earnings growth in large caps seems to be catching up. Large-cap stocks narrowed the growth gap with mid- and small-cap companies in the June quarter, which commanded higher valuations. Fund managers therefore suggest retaining long-term equity exposure and adding gradually within your asset allocation. The message amid the uncertainty: stay patient and keep your portfolio aligned with your goals, time horizon and ability to absorb risk.

Post-retirement healthcare

Next up is an initiative from the pension regulator to help plan for healthcare expenses, especially in retirement. A medical emergency can deal a serious blow to household finances when income is limited. The Pension Fund Regulatory and Development Authority's (PFRDA) NPS Swasthya aims to cushion that risk by combining a healthcare investment account with super top-up insurance, which pays once a specified deductible is met.

Subscribers can use the investment account to build savings to meet the top-up deductible and also cover eligible healthcare expenses. But there are limits: partial withdrawals are capped at 25% of contributions, and the insurance can be renewed only up to age 85. Aprajita Sharma explains how the scheme works and the tradeoffs to consider.

Insure your adventures

In the insurance space, Shefali Anand has an important story on how to insure your adventure trips. If you're planning a high-altitude hike, deep-sea diving, or rafting on your holiday, make sure your travel insurance covers these activities. Otherwise, an accident could leave you facing hefty medical and rescue bills. Adventure sports cover, often available as an add-on, can bridge the gap, but protection varies widely across insurers.

Check whether your specific activity is included, along with age restrictions, altitude limits, supervision requirements and exclusions for professional participation. Medical expenses may be subject to separate caps, while deductibles determine how much you pay out of pocket. Understanding the eligibility conditions and exclusions is just as important as buying the cover.

HYROX budget planning

And finally, Ann Jacob has a great read on the cost of competing in HYROX, an indoor fitness race combining strenuous workouts and running. Preparing for it takes months of dedicated training, but for many, financial preparation may take a back seat. And that's a mistake, given it's not just a high-intensity competition but also an expensive one. A Mumbai entry pass can cost around ₹8,500, but registration is only the start. Training, footwear, nutrition and recovery can push a three-month preparation budget from ₹70,000 to over ₹1 lakh. Add travel, accommodation and meals for an outstation event, and the total can reach up to ₹1.65 lakh.

Now, easy credit may make these expenses accessible, but it doesn't make them affordable. Experts recommend saving at least six months in advance and skipping unnecessary expenses related to gear and supplements. After all, physical fitness shouldn't come at the cost of financial health.

Money Guru

In this week's Money Guru, Aprajita Sharma and Harsh Kumar speak to S. Ramann, chairperson of the PFRDA, about reforms reshaping the National Pension System (NPS). Over the past year, the regulator has expanded investment choices, eased lock-in rules and sharpened its focus on turning retirement savings into a steady income, exploring options beyond annuities. Ramann discusses the proposed Retirement Income Scheme, NPS Swasthya and the role of annuities, alongside efforts to widen pension coverage and improve grievance redressal.