People in India still have the mindset to invest in Fixed Deposits as they provide them with safety, comfort, and fixed returns. Bank Fixed Deposits provide 5-7% returns, sometimes insufficient to match the inflation rate. On the other hand, equity offers higher returns, but people find the stock market risky because of market volatility and lack of knowledge.
Corporate Bonds provide a middle path and a bridge between the two, being safe and providing better returns than bank Fixed Deposits. In this blog, we will explore the current trends in the Indian bond market.
Bonds are financial debt instruments issued by private or public corporations to raise funds from the public. When you invest in a bond, you provide a loan to the issuer. In exchange, the issuer pays a pre-determined interest and principal amount on maturity, thus providing a stable source of income.
India’s corporate sector requires funding and banks’ funding may not be enough to fund the company’s financial requirements, resulting in companies issuing corporate bonds.
The debt market has become an attractive investment option as we are near the end of a rate hike, and the yields are significantly higher. Higher returns in the bond market are yielded when the investments are made near the peak of the rate cycle.
Now that we have explored the bond market trends, it is important to understand how the bond market trends impact bond investors and their investment decisions.
Repo rates refer to the rate at which the Central Bank lends money to Commercial Banks. It is considered a standard for determining interest rates in the country. RBI has kept the repo rate unchanged at 6.5% during the August 2023 monetary policy, which, if changed, would have impacted bond investors.
An unchanged repo rate means stability in the interest rate for bond investors indicating that the Central Bank is confident of the country's overall financial health and inflation levels, which may positively affect the investors' sentiments.
However, it is essential to consider other factors apart from the repo rate while investing in bonds, such as expected inflation, credit ratings, and fiscal policies that may influence bond yields and prices.
Considering the current market conditions and factors, including the end of a rate hike and higher yields, 2023 presents a promising investment opportunity in bonds. The RBI’s decision to keep the repo rate unchanged signifies stability and confidence in the country’s financial health. Corporate Bonds have been a stable fixed-income investment option with a safety net. Knowing your risk appetite and investment goal helps you select the right bond.
It is advisable to know your investment goals before investing. Conducting research and understanding the risk-reward dynamics is vital before you invest your money.
You can also explore various curated investment opportunities in Corporate Bonds from Grip.
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Disclaimer - Investments in debt securities are subject to risks. Read all the offer-related documents carefully. The investor is requested to take into consideration all the risk factors before the commencement of trading. This communication is prepared by Grip Broking Private Limited (bearing SEBI Registration No. INZ000312836 and NSE ID 90319) and/or its affiliate/ group company(ies) (together referred to as “Grip”) and the contents of this disclaimer are applicable to this document and any and all written or oral communication(s) made by Grip or its directors, employees, associates, representatives and agents. This communication does not constitute advice relating to investing or otherwise dealing in securities and is not an offer or solicitation for the purchase or sale of any securities. Grip does not guarantee or assure any return on investments and accepts no liability for the consequences of any actions taken based on the information provided. For more details, please visit https://www.gripinvest.in/.
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