For the last couple of years, small savings have made no noise but have left equities in the dust, handing over 8.2% while the top indices were having a hard time of it. The government has seen fit to hold rates for April-June 2026, and the message is plain: there is value in being safe. Still, don’t let that be an excuse to walk away from the stock market, particularly when you have long-term objectives in mind.
It’s a clear choice for the investor. On one side you have the kind of stable, tax-friendly yields the government puts on the table; on the other, the ups and downs and underwhelming numbers that equity holders have put up with. You have to ask yourself not who came out on top in the past two years, but what combination will get you where you need to be in ten.
Policy signal: rates held steady
You might have heard talk of rate cuts, but the government has left small savings schemes alone since January 2025. We’re in for the same in the April-June 2026 quarter, which means savers can continue to put their money in with policy support behind them.
The numbers are hard to ignore. You can get 8.20% in the Senior Citizen Savings Scheme or a Sukanya Samriddhi Account. There’s 7.70% in a National Savings Certificate, 7.40% from the Post Office Monthly Income Scheme, and 7.1% in the Public Provident Fund, to boot – and it comes with EEE tax treatment.
Then there are the rest of the options, most of them in the 7% range and above. A 5-year Post Office Time Deposit and the Kisan Vikas Patra are both at 7.50%. If you go with a Recurring Deposit, you’re looking at 6.70%, and the plain old Post Office account is at 4%.
Short-term scorecard: equities lag, safety leads
Sure, equities are supposed to run circles around inflation, but the last 24 months have put that to the test. Niftyindices figures tell the story: the Nifty 100 has a 2-year CAGR of -0.15% and a 1-year return of -1.52%.
Looking past the large caps didn’t do much for those with a diversified book. The Nifty Next 50 was up 3.99% in a year but down 0.38% in two. The Midcap 150 gave 5.19% for 1 year and 4.39% for 2. Even the Smallcap 250, with 9.50% for 1 year, only put up 1.12% over 2 years.
If you are in funds, the tale is the same. Morningstar has large cap funds at -5.37% for 1 year and 0.68% for 2. Large and midcaps are -2.48% and 3.25%. Flexicap? -3.45% and 1.77%.
The mid and small-cap space fared a little better, but they are no match for the kind of yields you can get today. Midcap funds are at 1.09% (1 year) and 5.29% (2 years). Smallcaps 0.99% and 4.25%. Multicaps have given -1.44% and 3.40%, and ELSS is sitting at -4.74% and 1.21%.
Long-term picture: equities still dominate
Give it enough time and equities are where you want to be. The Nifty 100 has been compounding at 11.99% over a decade and 10.64% over 20. The 5-year mark is 9.15% and 15-year is 10.34%. That is what makes them the bedrock of any wealth plan.
Midcaps have been the star performers through thick and thin. Over 5 years the Nifty Midcap 150 is at 18.05%, 17.96% for 10, 15.79% for 15, and 13.67% for 20.
You can make a case for smallcaps as well, with 17.52% in five years, 15.28% in 10, 13.14% in 15 and 12.02% in 20.
Then there is the Nifty Next 50, which occupies the space between large and mid caps. Its numbers are 13.76% (5Y), 13.92% (10Y), 12.95% (15Y) and 12.60% (20Y). When you put that kind of compounding up against a flat 7-8%, it makes a world of difference.
Put it in rupees and the contrast is plain. A Rs 1 lakh put into the Nifty 100 two decades ago is now at Rs 9.04 lakh. Do the same with the Nifty Midcap 150 and you’re looking at close to Rs 13 lakh.
What this means for your allocation
The way some small savings plans have been outperforming of late is a nudge to look at time horizons, not the news. Are you after some stability or income in the near future? Then guaranteed rates have an appeal. But if you are in it for the long haul, equities still have a place at the table.
“Small savings are for the conservative type – a retiree or someone in mid-career who puts capital protection first,” says Aditya Agarwala, co-founder and CIO at InvestValue. “Equities are for those who can handle the ups and downs and don’t need to put their hands on the money for 7-10 years.”
He has seen equity SIPs over 10 years deliver. For anyone focused on growth, that’s what counts, not the last couple of years of drawdowns or how the indices have been spread out.
Some things to keep in mind:
– Let your goals and cash flow drive asset choice
– Rely on small savings for safety
– Be in equities for 7-10 years at a minimum
– You can lock in as much as 8.2% for the short term
– Re-evaluate your mix, but stick to your guns
Where do small savings come in?
Retirees will find the Senior Citizen Savings Scheme hard to pass up. At 8.20% with government backing and quarterly credits, it gives you the kind of certainty you want when you need it.
Families can use the Sukanya Samriddhi Account (8.2%) to plan for a daughter’s future. You can put in as little as Rs 250 a year or up to Rs 1.5 lakh; the account is open for 15 years and comes of age in 21.
If you want to compound in a tax-friendly way, the National Savings Certificate is at 7.70% for five years. The Post Office Monthly Income Scheme, at 7.40%, is for those who want a steady stream of income with a 5-year hold. And the PPF, at 7.1%, is still the go-to for EEE tax benefits and building wealth over 15 years.
Risks, opportunities, and what to do
Don’t be tempted to follow the leader from the past 24 months. Small savings rates are up for review every quarter, even if they haven’t moved since January 2025 and won’t again until April-June 2026. Equities can underperform for a while and then make up for it in a hurry once the mood and earnings change.
The sensible thing is to put your near-term objectives in guaranteed products and let your longer-term money work in equities. It hedges your sequence risk and you don’t give up the market’s edge.
In the end, the numbers tell a straightforward story. Small savings are in fine form. Equities have proven themselves over 10-20 years. Put some of each in your portfolio, in the right measure for you, and you’ll be in good shape.
