Income funds are mutual fund schemes that emphasise on current income, either on a monthly or quarterly basis by investing in government as well as corporate debt securities.

"Investors should consider investing in income funds with long duration to benefit from the possible decline in interest rates in the next three months," said Dhawal Dalal, Executive Vice President and Head of Fixed Income at DSP BlackRock Investment Managers.

After a long gap of nine months, RBI yesterday reduced the short-term lending rate by 0.25 per cent and decided to release Rs 18,000 crore of primary liquidity.

Arvind Chari, Senior Fund Manager (Fixed Income) at Quantum Asset Management Company said: "We expect 10 year bond yields to remain range bound in February and move lower towards the March policy in expectation of the rate cut in the

March quarterly review."

The 0.25 per cent CRR cut and government spending would address the liquidity tightness and further tightness would be addressed through Open Market Operations (OMOs), he added.

Lakshmi Iyer, Senior Vice President and Head, Fixed Income, Kotak Mutual Fund said: "While the 25 bps cut in repo was expected, its realisation has provided a palpable relief to the markets...We may continue to see further rate reversion going forward, so as to better measure the fiscal impact on the economy."