If the country's huge middle class cluster was to collectively draw up a list of India's Most Unloved post-February 28, the chances of Yashwant Sinha figuring on top of that heap are fairly high. And this group of millions, largely comprising savers, has good reason to be peeved. For, in Union Budget 2002-03, the Finance Minister hit them with a double whammy: he reduced the interest rates on small savings by 0.5 per cent per annum; coupled with that, depending on how much you earn, the rebate under Section 88 has either been halved or done away with (those earning a gross income of more than Rs 5 lakh can no longer avail of a rebate, and those earning between Rs 1.5 lakh and Rs 5 lakh will have to settle for 10 per cent). Result? Suddenly once-popular instruments such as Public Provident Fund (PPF), National Saving Certificates (NSC), postal savings schemes, and Kisan Vikas Patras no longer appear as attractive as before. And neither does the tax rebate, unless you are an author, playwright, artist, musician or sportsperson-which we are safely assuming most of our dear readers are not.

Indeed, for the fixed income investor, life appears pretty blue. Risk averse to a fault, most of this breed of household savers was content with the zero-risk, high-return schemes being offered by the government. One study of the financial assets of the household sector reveals that bank deposits account for 45 per cent of household savings and contractual savings make up 30 for 30 per cent. Clearly, tax breaks were the guiding beacon for most of such fixed income investments. Those days are gone, along with the administered interest rates, which were substantially higher than those on the market, and the tax breaks on contractual savings.

''The general feeling is that this budget is a wake-up call from the fm to the nation. He is calling upon the people to tell them that they have to make their own investment decisions and they should no longer be dependent on the government to make their investment decisions for them,'' points out Rajiv Bajaj, CEO, Bajaj Capital. He adds that now it is up to each individual to make his or her investment decisions, based on his or her goals, including protection cover and pension plans. ''The assured returns era is coming to an end.''

The larger picture that emerges is that the linking of returns on contractual savings to the market rates, and the reduction in tax breaks will now place all the players-government, banks, mutual funds, and corporates-on a level playing field. Retail investors have little choice but to fix their priorities: is it tax rebates or returns on investment? They have to learn to distinguish between the two to survive in the all-new free market. ''Post-budget, the risk and return profiles of portfolios will change, there will be more transparency and the service levels will be high,'' says Sashi Krishnan, Fund Manager (Debt Segment), Cholamandalam Cazenove Mutual Fund. What this means is that the type of risk you opt for will determine the returns you are likely to achieve.

"Post-budget, there will be higher service levels and more transparency" Sashi Krishnan, Fund Manager, Cholamandalam Cazenove

As an investor, you can crib till the cows come home about Sinha's shenanigans, but the sooner you come to terms with the low interest rate regime, the better it will be for you. The (bitter?) reality is that the real rate of interest is still high, even higher than in the era when you were accustomed to a 14 per cent-plus return on deposits. Reason? Inflation was very high then. The difference today? Inflation is now at all-time low. ''Investors should go by MRRR: Market-related realistic returns, rather than absolute returns,'' says Bajaj.

Once you begin to accept the lower-rate regime, also try to drill into your head the fact that non-assured returns aren't an oxymoron. Look no further than debt mutual funds for proof of the pudding, which delivered returns of over 17 per cent last February. A note of caution here, however: don't expect such handsome returns this time round too, although suffice it to say that they'll still be higher than most of the Sinha-hit fixed income alternatives.

The long-term objective of policy makers, it appears, is to make the debt market more and more unattractive (if you have any doubts about that, try justifying the ceiling of Rs 2 lakh on the RBI Relief Bonds). And, in case you're still wondering where the Finance Minister & Co want you to park your money, look no further than Dalal Street (but that's another story). But if you are one of those who fear for your shirt and consider risk a four-letter word (it is one, right?), don't despair. Without invoking the gods, you could still wangle 9 per cent-odd annual returns from your good old small savings in fiscal 2002-03 by building a broad-based, balance portfolio. Here's how:

PPF: Don't give up on it, not yet. For, the returns at 9 per cent, are still better than those from bank deposits. And if you feel that PPF is illiquid since the money is repayable only after 15 years, don't forget that PPF holders can withdraw from the account at the end of the sixth year, with a cap. You can draw 50 per cent of the four-year balance in the account, or the balance of the previous year, whichever is lower. So that provides some liquidity. All in all, despite Sinha's attempts, PPF still has its attractions: zero risk, and returns higher than bank deposits.

BANK DEPOSITS: That we recommend PPF doesn't mean that you should give bank deposits short shrift. For, although your returns are lower now, when it comes to sheer convenience and liquidity, there's nothing to beat the bank. Milind Barve, Managing Director, HDFC Mutual Fund, points out that for those with an investible surplus of Rs 4-5 lakh, Rs 1 lakh should go into a bank deposit, as it provides the flexibility to decide future allocations. Meantime, you would do well to choose a bank that bundles value-added services along with the deposits.

"Those having Rs 4-5 lakh investible funds should place Rs 1 lakh in a bank deposit" Milind Barve, Managing Director, HDFC Mutual Fund

COMPANY DEPOSITS: Housing finance companies like HDFC and ICICI Home Finance offer 9-11 per cent interest rates, as do IDBI Suvidha deposits and IFCI family deposits. Blue-chip corporates offering three-year deposits also look good. Don't, of course, get taken in by a high-profile name; remember to look at the rating of the company before investing in a fixed deposit. A risk-averse investor should stick to AAA-rated companies even at the cost of getting lower interest on investments. The a-rated, second rung of corporates would be your option if you have a moderate penchant for risk.

GOI BONDS: For long-term investors looking for ultra-safe investments, the RBI Relief Bonds is the ideal option, offering an 8.5 percent tax-free return. What's more, they're exempt from wealth tax too, and you can borrow against these bonds. The damper of course is the Rs 2 lakh limit that's been set in the budget. But you could always invest in your sons' and daughters' names too, right (you think Sinha will plug that loophole next year?)

POST OFFICE SAVINGS: They offer 9 per cent in various schemes ranging from holding periods of two to seven years. The monthly income schemes are popular amongst small investors. It's ideal if you are looking to invest a lump sum and earn interest on a monthly basis. Small wonder then that this scheme is a boon for retired people. Another scheme, Kisan Vikas Patra, doubles your money in seven years. National saving certificates are beneficial for investors who want to deposit a lump sum in a year in order to get the tax rebate under Section 88 of the Income Tax Act.

MUTUAL FUND DEBT SCHEMES: They're set to gain in popularity, especially as short-term investments, since they promise that hard-to-attain balance of returns and liquidity. That's possible because these funds are invested in short-term money market instruments and usually the average interest earned on them is almost similar to the prevalent call money market rates. But a horizon of at least a year is recommended; a three-month type period could be volatile, adversely affecting the returns on investments. What's more, capital gains tax could be reduced for investments of over a year.

The writing is clearly on the wall for the small saver: returns may no longer be assured, the government may no longer be your best friend. But that doesn't mean the fizz has gone out of fixed income instruments-as long as you reconcile that the returns may not be fixed any longer.