Build stable, predictable returns in a rising interest rate world.
What Are Bonds?
A bond is a fixed-income investment where you lend money to an entity (government, company, etc.) for a defined period at a specified interest rate.
In return, you receive:
- Regular interest (called coupon)
- Repayment of your capital (called face value or principal) at maturity
Bonds are less risky than stocks, offer predictable returns, and play a vital role in asset allocation.
Why Bond Investing Is Gaining Popularity in India
With rising interest rates, volatile equity markets, and more digital access, Indian investors are exploring bonds like never before.
Key reasons:
- Safer than equities
- Regular income
- Diversification
- Tax-efficient options available
- Available in small ticket sizes today
Types of Bonds Available in India
1. Government Bonds (G-Secs)
Issued by the Central or State Governments to fund their expenditure.
- Tenure: 1–40 years
- Interest: ~6–6.5% currently (10 year)
- Risk: Virtually zero (sovereign guarantee)
- Listed on RBI Retail Direct and NSE/BSE platforms
Best for: Risk-averse long-term investors
2. Treasury Bills (T-Bills)
Short-term government securities issued for 91, 182, or 364 days.
- Sold at a discount, redeemed at face value
- No coupon (zero-interest)
- Traded in wholesale & RBI Retail Direct market
Best for: Parking short-term funds safely
3. State Development Loans (SDLs)
Issued by individual state governments.
- Slightly higher yield than G-Secs (~7–7.7%)
- Lower liquidity, but still safe
Best for: Conservative investors looking for slightly better returns
4. Corporate Bonds / Debentures
Issued by private/public companies to raise capital.
- Returns: 7.5% to 10% depending on credit rating
- Higher risk than G-Secs, but also higher yield
- Credit Ratings: AAA (safest) to D (default)
Best for: Investors seeking better yields with managed risk
5. Tax-Free Bonds
- Issued by PSUs like NHAI, IRFC, PFC etc.
- Yield ~5.5–6.5%
- Interest income is 100% tax-free
Best for: HNIs, retirees in high tax brackets
6. Sovereign Gold Bonds (SGBs)
Technically bonds—but linked to gold prices + 2.5% fixed interest.
Best for: Gold investors looking for returns + safety
7. RBI Floating Rate Savings Bonds (FRSBs)
- 7-year tenure
- Interest resets every 6 months
- No secondary market
Best for: Long-term savers seeking floating returns
How Bonds Work (Example)
Say you buy a ₹1,00,000 bond at 8% interest for 5 years.
- You get ₹8,000 every year (₹4,000 every 6 months if paid semi-annually)
- At maturity, you get ₹1,00,000 principal back
- If sold before maturity: price may vary (can be more or less)
Returns depend on:
- Interest rate at time of purchase
- Credit quality of issuer
- Market demand for bond
Bond Yields vs Returns
Coupon Rate – Fixed interest you receive annually
Yield to Maturity (YTM) – Your return if held till maturity, considering market price
If bond price falls below ₹100 (face value), YTM > Coupon
If bond price rises, YTM < Coupon
How Interest Rates Affect Bond Prices
Bond prices and interest rates move inversely.
- If interest rates rise, bond prices fall
- If interest rates fall, bond prices rise
This is why timing matters if you plan to trade bonds before maturity.
How to Invest in Bonds in India
Online Platforms:
- RBI Retail Direct: Direct access to G-Secs, T-Bills, SGBs
- NSE GoBid / BSE Direct: G-Sec auctions and SGBs
- Bond marketplaces: Wint Wealth, GoldenPi, IndiaBonds, BondsIndia
- Mutual fund platforms (for debt funds investing in bonds)
Banks and NBFCs:
- Corporate bonds and PSU bonds often sold through brokers/NBFCs
Who Should Invest in Bonds?
| Investor Type | Bond Strategy |
| Conservative | G-Secs, SDLs, SGBs, FRSBs |
| Moderate | Mix of G-Secs + AAA corporate bonds |
| Aggressive | Higher yield AA+ or A rated bonds + market timing |
| Retirees | Tax-free bonds , SGBs, SDLs for stable income |
| Short-Term Savers | T-Bills, short-term bond funds |
Bond Mutual Funds vs Direct Bonds
| Criteria | Direct Bonds | Debt Mutual Funds |
| Control | High | Low (fund manager decides) |
| Liquidity | Depends on bond type | High |
| Entry Ticket | ₹1,000–₹10,000 | ₹100–₹500 SIP |
| Risk | Issuer risk | Credit + interest rate risk |
| Tax | Based on bond type | Debt fund taxation |
Pros of Bond Investing
- Predictable income
- Capital preservation (if held till maturity)
- Diversifies equity-heavy portfolios
- Multiple tenures and types available
- Government and private options
Risks in Bond Investing
- Credit Risk – Company defaults or delays payments
- Interest Rate Risk – Value falls if interest rates rise
- Liquidity Risk – Hard to sell bonds at good price
- Reinvestment Risk – Returns fall if rates fall before maturity
Mitigation tips:
- Stick to high-rated (AAA/AA+) issuers
- Diversify across issuers and maturities
- Hold till maturity to avoid price risk
Final Thoughts: Bonds Deserve a Seat at Your Table
In 2025 and beyond, bonds are no longer “boring” investments. They can be powerful tools for:
- Generating income
- Balancing equity risk
- Beating inflation (with the right choices)
- Achieving short- and long-term goals
The key is to match the bond with your financial objective, understand the risks, and monitor credit quality.
Ready to Get Started?
Whether you’re a conservative investor, a retiree, or someone looking to balance your equity exposure—bond investing can be your gateway to stability and consistent returns.
Need help choosing the right bonds? Reach out to Anupam wealth for a personalized consultation or investment plan.