Trader's Gateway to Financial Markets
Wednesday August 27th 2014

How to invest in Indian bond market?

With a host of lucrative offers coming up, it is the best time to invest in bonds in India. There has been a lot of development and economic progress in the last few decades and the fruits are showing. For the corporate debt market in recent years, asset backed securities have provided the backbone. There is a wide array of bonds that are ideal for investment like convertible bonds, floating rate instruments, zero coupon bonds, step redemption bonds and much more.

For investing in bonds, you have to be a non resident Indian or a NRI. Mutual funds are attractive investment instruments for NRI’s and many of them invest in them. You can invest through an agent or directly approach a mutual fund house or your banker where different mutual fund opportunities are also available. You can visit their websites and discuss investment plans and opportunities as well for portfolio investments or buying a company share.

IMPORTANT: PAN Number is compulsory for Investment in India >> Know More

Public and private sector bonds

You can also buy dated government securities that are bonds with more than a year’s maturity. For bonds, NRI’s can approach public sector undertakings as well which are involved in public centric activities like engineering and energy development. You have to search banks that sell public sector bonds.

More and more investors are opting for bonds from private players instead of those offered by the government. The ICICI bonds offer several upfront advantages to the investor and the IDBI has two put and call options before maturity as well.

Even though the equity market has seen a drop in the past few decades, the bond market has grown in leaps and bounds. The Indian bond market, especially the bonds issued by the government of India, has grown from 28 percent to 36.7 percent of the total GDP.

More money has been funneled from the equity to the bond market in recent years. There are of course some downsides of the Indian bond market as well. Instead of being a trading portal like a stock exchange, the India bonds are primarily negotiated between dealers and there is an inbuilt credit risk as well.

Experts upbeat about Indian bonds

There are many bond markets the world over like in Korea, where they have been instrumental in the economic growth of nations. Soon, the Indian bond market will be a formidable force to reckon with as investors are increasingly looking for secure investment opportunities where they can be assured of a fair return with low risks. The mood is upbeat and Indian bonds have been able to get more business within a short span of time in recent years. Compared to China, the Indian bond market is stronger and is profitable as well.

The main reason for the rise in Indian bonds is that they have a high amount of liquidity and is managed mainly by 16 major dealers. They underwrite the sales of the debts of the Indian government and deal with the country’s central banker, the Reserve Bank of India. Many bonds that are available at the secondary market have an extended maturity period of over 30 years. The increasing stability of the stock market has also fuelled the growth of bonds.

The main impediment to growth of attracting more capital by getting in more companies has been solved. There are more companies offering quality bonds these days which has made the investor check out the offers and plough in his or her money. The market is more liquid and the fixed income feature is also favored by many investors. Many financial experts studying the scenario in India are very upbeat about the bond market.

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