Amid the stock market crash, largely fuelled by the Wall Street contagion that has

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affected markets worldwide, desperate investors are scurrying to safer avenues to protect their wealth.

The rate of inflation, which was 4 per cent in January, has surged above 12 per cent since July 26, forcing the central bank to hike key lending rates and suck out excess liquidity. The rupee has been depreciating steadily against the dollar for a few weeks now. These factors have had a debilitating impact on the stock market. The BSE Sensex has fallen 33 per cent since January, leading to a substantial erosion of investors' wealth. The failure of investment banking behemoths has only worsened the market conditions.

In this bear phase, investors are hunting for safe havens and rushing to all kinds of debt instruments like fixed deposits (FDs) and fixed maturity plans (FMPs). Here we take a look at some of the products that are tailor-made for tough times.

Instruments for survival: Gold ETFs have given decent returns to investors. In the last 6 months, they have given a return of more than 9 per cent, while it is 35 per cent if one takes into account a period of last 12 months. For instance, UTI Gold Exchange Traded Fund and Kotak Gold ETF have given 9.88 per cent and 9.85 per cent return in the last six months and 37.57 per cent and 37.45 per cent in the last one year.

Gold usually appreciates faster during high inflation and high interest rate conditions. It gives higher returns in times of uncertainty.

Following the bankruptcy of Lehman Brothers, gold appreciated 1.93 per cent. And gold ETFs, which track gold, are gaining too.

Lakshmi Iyer, head of products at Kotak Mahindra Mutual Fund, says, “In the short term, there may be a slight correction, but in the long term, the fundamentals are intact.”

FMPs have always been there, but they have become more popular on account of their high indicative returns at lower risks. Besides, these are tax-efficient products that usually give higher post-tax return in comparison with other instruments

in the fixed income category.

Twelve-month FMPs, like IDFC FMP Yearly Sr 26 Plan-A and Kotak FMP 12M Series 9, give indicative returns of 10.85 per cent and 10.50 to 11.50 per cent respectively upon maturity.

Ashish Nigal, head of fixed income at Religare AEGON AMC, says, “Up to one year, FMPs are a better bet. In the long term, one can go with FMPs that can give 11 to 12 per cent. Long-term funds give similar return, but they carry lot of risk.”

Income funds have also outperformed Sensex. For instance, Canara Robeco Income Scheme Growth and Franklin India International Fund have given returns of 13.7 per cent and 12.1 per cent in the last six months and 17.04 per cent and 18.26 per cent in the last one year.

Structured products or equity-linked FMPs have also been favourites among investors. However, these products have been confined to high networth individuals. Murky market conditions have now demolished entry barriers and retail investors are also seen lapping up these instruments. Birla Sun Life and ICICI Prudential mutual funds have launched a couple of such products.

Dhruv Agarwala, co-founder of iTrust Financial Advisors, says, “These instruments are best suited for investors who want their principal to be protected and at the same time wish to gain by participating in the equity market.”

At a time when most equity-related funds have been humbled, pharma funds have performed better due to the defensive nature of the underlying stocks. Pharma sectoral mutual funds, UTI Growth Sector Fund (Pharma and Healthcare) and Franklin Pharma Fund, have given returns of 15.34 per cent and 12.77 per cent in the last six months.

Banking sector funds have not performed that well in this market turmoil. But experts say once this turmoil is over, it's the banking and financial sector stocks that will move northward first. Banking sector funds can be a good bet if one can hold on to them for a longer period.