Bond Market, Next Big investment Vehicle in India
Introduction to Bond Market:
A bond is a debt instrument. Whenever one buys a bond, they are effectively lending to
governments, corporate or municipal corporations to name a few. In return for the loan, the
issuer promises to pay you a specified rate of interest during the life of the bond and to repay the
face value of the bond (the principal) when it “matures,” or comes due.
But the question remains...
Why to invest in bonds?
This is basically to diversify one’s portfolio and risks. As bonds guarantee fixed returns of
interest and return of principal, they are one of the safest forms of investments in existence.
Many bonds are inflation adjusted making them even more attractive. People generally invest in
bonds to decrease their capital erosion risks (for example by securities markets), to save for
future use or even to save taxes. Sometimes people don’t directly invest in bonds, but do so via
Bond related mutual funds. The diversity of fixed-income securities presents investors with a
wide variety of choices to tailor investments to their individual financial objectives. Whatever
the goals, your investment advisor can help explain the numerous investment options available to
help you reach them, taking into account your income needs and tolerance for risk.
The scenario of Indian Bond markets...
The debt market is much more popular than the equity markets in most parts of the world. In
India the reverse has been true. Nevertheless, the Indian debt market has transformed itself into a
much more vibrant trading field for debt instruments from the rudimentary market about a
decade ago. The sections below encompass the transforma ...