Lessons from equity market crash: Why FD investors are having the last laugh after market falls

Equity investors have been struggling since September 2024 when the market hit its peak. From September 27, 2024, to now (February 26, 2026), major indices like Nifty 100 and Nifty Midcap 150 slipped by 3.8% and 1.2%, respectively, according to official Nifty data. The Nifty Smallcap 250 index performed even worse, as it slid by 12.8%.

The last 8 months (since June 27, 2025) haven’t been any better- the Nifty 100 index has shown no returns, the Midcap 150 index has moved up by just 1.1% and the Smallcap 250 index is still down 9%. While many equity investors are feeling disheartened by their modest or negative returns since September 2024, fixed deposit (FD) investors seem to be having the last laugh with their investment growing at a steady pace.

Even though many banks cut FD rates in the last one year following the Reserve Bank of India (RBI) repo rate cut, many banks and small finance banks (SFBs) are still offering their best FD rates in the range of 7%- 7.9%. So, what can investors learn from this market downturn, and how can they take advantage of the current market conditions and FD returns? Let’s explore!

Performance of leading share market indices since September 27, 2024

Index	Since Sept 27, 2024	Since June 27, 2025
Nifty 100	-3.80%	0%
Midcap 150	-1.20%	1.1%
Smallcap 250	-12.80%	-9%

PSU banks offering highest FD rates (As per Paisabazaar)

Bank Name	Highest FD rate (%)	Tenure (highest slab)
Punjab & Sind Bank	6.75	666 days
Bank of India	6.7	450 days – Star Swarnim
Bank of Maharashtra	6.65	400 days
Indian Overseas Bank	6.6	444 days
Punjab National Bank	6.6	444 days
Union Bank of India	6.6	444 days
Canara Bank	6.5	555 days
Central Bank of India	6.5	2222 days; 3333 days
Bank of Baroda	6.45	444 days – BoB Square Drive Deposit Scheme
Indian Bank	6.45	444 days
State Bank of India	6.45	444 days – Amrit Vrishti

Private banks offering highest FD rates (as per Paisabazaar)

Bank name	Highest FD rate (%)	Tenure (highest slab)
SBM Bank India	7.85	391 days to 15 months
Jammu & Kashmir Bank	7.25	888 days
Bandhan Bank	7.2	2 years to less than 3 years
RBL Bank	7.2	18 months to 3 years
DCB Bank	7.15	60 months to 61 months
Tamilnad Mercantile Bank	7.1	456 days (TMB456)
City Union Bank	7	500 days
CSB Bank	7	13 months
IDFC FIRST Bank	7	450 days to 5 years
IndusInd Bank	7	1 year 6 months to less than 1 year 7 months
YES Bank	7	18 months 1 day to less than 5 years
Kotak Mahindra Bank	6.7	15 months to less than 3 years
Federal Bank	6.7	36 months
Karnataka Bank	6.65	555 days
DBS Bank	6.6	376 days to 600 days
South Indian Bank	6.6	2 years
ICICI Bank	6.5	3 years 1 day to 10 years
IDBI Bank	6.5	Above 2 years to less than 3 years
Axis Bank	6.45	15 months to 10 years
HDFC Bank	6.45	18 months to 3 years Top of Form Bottom of Form

Small finance banks offering highest FD rates (As per Paisabazaar)

Bank Name	Highest FD rate (%)	Tenure (highest slab)
Suryoday Small Finance Bank	7.9	5 years
Jana Small Finance Bank	7.77	Above 3 years to 5 years
slice Small Finance Bank	7.75	18 months 1 day to 18 months 2 days
ESAF Small Finance Bank	7.6	444 days
Shivalik Small Finance Bank	7.5	21 months 1 day to 22 months
Utkarsh Small Finance Bank	7.5	2 years to 3 years
Ujjivan Small Finance Bank	7.45	2 years
Equitas Small Finance Bank	7.2	888 days
AU Small Finance Bank	7.1	30 months 1 day to 36 months

In the 3 tables above, you can see that many PSU bank FDs have been offering more than 6.5% interest. While private banks have been offering up to 7.85% interest rate, the highest FD rate in a small finance bank is 7.9%.

FD investors have a psychological edge in a falling market

Vijay Kuppa, CEO, InCred Money told ET Wealth Online that in the current investment phase, capital protection is dominating and FD returns are appearing good.

Kuppa says, “In uncertain times, return of capital becomes more important than return on capital, and stability itself becomes a form of return,”

Swapnil Aggarwal, director, VSRK Capital, says FD investors’ are holding the advantage of psychological comfort and capital protection.

According to Aaggarwal, investors prioritise safety and guaranteed returns over higher but uncertain returns in volatile markets.

“FD investors feel safer because returns are fixed and insulated from market volatility. They offer capital protection and predictable income, avoiding mark-to-market losses during corrections,” says Aggarwal.

Why are FD interest rates looking competitive against equities?

Kuppa says that looking at recent performance of equities, FD returns appear to be attractive, but he cautions against underestimating equities in the long term.

“A 1-year FD could deliver a 7% return with certainty, while equities have seen volatility and muted returns recently. However, FDs are not meant to outperform equities over full cycles,” says Kuppa, pointing out that high-quality corporate bonds can be an alternative within fixed income.

Sachin Jain, managing partner, Scripbox says equity returns should be judged over full economic cycles, not short-term volatility phases where FDs may appear attractive.

“FD and equity investors have different risk profiles. FD investors prefer predictable returns and capital safety. The perception of safety is a short-term effect of equity volatility; both asset classes serve different purposes,” says Jain.

FDs are good for asset allocation during market downturns

Aggarwal says every market fall reinforces investors’ belief in diversification.

“FDs stabilise portfolios, provide liquidity, protect capital, and support short-term financial goals,” says Aggarwal.

Kuppa believes a market fall highlights the importance of emergency and liquidity buckets.

According to Kuppa, FDs ensure investors don’t sell equities at a loss for expenses.“A portfolio without fixed income lacks balance; asset allocation helps investors survive downturns,” says Kuppa.

Jain says market falls are temporary and no asset class outperforms consistently.

Jain too thinks FDs provide predictability, liquidity, and resilience, helping investors rebalance during volatility rather than chase returns.

How should long-term investors strike a balance between equity and fixed income investments?

Jain suggests avoiding emotional reactions and focus on disciplined asset allocation. Jain believes long-term equity wealth creation requires patience and consistency, not market timing.

Kuppa feels for investors with a long-term investment horizon, where drawdowns are short-term noise.

Kuppa suggests investors should stay invested but periodically review allocation and rebalance rather than panic sell.

“Rebalancing is discipline, panic selling is emotion. The key is to respond with structure, not react with fear,” he says.

According to Aggarwal, market corrections are part of the cycle and can be seen as opportunities to accumulate quality assets.

“Attempting to time the market often leads to missed opportunities during recoveries. Investors with a long-term horizon can use such phases to accumulate quality assets at relatively lower valuations,” says Aggarwal.

However, market fluctuations won't make any impact on FDs. If FD investors want predictable income at higher returns, they can follow the FD laddering strategy, where they can make investments in different tenures of FDs. Once FD rates rise, they will benefit and get higher maturity amounts.

They can also invest in the Reserve Bank of India (RBI) floating rate bonds, which at present, offers an 8.05% interest rate, and are at the bottom end of the rates. Once, the RBI increases its repo rate, floating bonds will offer higher returns. However, if as an FD investor, you opt for floating bonds, it is advisable to invest only 20% of your fixed income portfolio in such bonds.