Investor Series

(This is first of its kind article in investor series. We will come up with various articles on investments avenues in today's financial market. Today we will have a look on "Investing in bonds in India".) Bonds are fixed income instruments, which provide steady returns. Bond represents debt security; which means you are basically lending money to the borrower that has to repay the principle with interest over a specified period of time. Bonds can be issued by:
Businesses Governments Private issuer

Key advantages: 1. 2. Investing in bonds is safer than investing in equity. Bonds provide steady returns despite the fluctuations in stock market.

Key disadvantages: 1. Bonds are subject to default risk. 2. Stocks generally outperform bonds in long term.

Buying, Selling and Holding Of Bonds in India: Investors can subscribe to primary issues of Corporate and Financial Institutions (FIs). It is common practice for Corporate and FIs to raise funds for asset financing or capital expenditure through primary bond issues. Some bonds are also available in the secondary market. The minimum investment is between Rs 5,000 to Rs 10,000. There is no upper limit to your investment in bonds. It is subjected to your risk appetite. The duration of a bond issue usually varies between 5 and 7 years. Interest paid typically varies from entity to entity. Liquidity of a Bond: Bonds can be traded in secondary market like NSE, BSE. Some bonds issue also offers Call option or Put option. Under put option, investor can approach to the issuing entity to sell back the bond to the issuer before maturity. While in call option the issuer has the right to buy back the bond from investor. Mode of Holding Bonds:

Bonds are most commonly held in form of physical certificates. Of late, some bond issues provide the option of holding the instrument in demat form; interest payment may also be automatically credited to your bank account.

Some bonds traded in NSE: LAST CHANGE FACE PRICE (%) OPEN HIGH LOW VOLUME VALUE 170 -2.19% 170 170 170 25 170

COMPANY NAME Britannia Industries Series : N1 Dr Reddys Laboratories Series : N1 India Infoline Series : N1 India Infoline Series : N2 L&T Finance Holdings Series : N2 L&T Finance Holdings Series : N4

4.97 1,005.02 1,067.15 1,008.00 1,068.38

-0.20% 1.03%

4.98

4.98

4.95 998.5

28404 666 90 520 1032

5 1,000 1,000 1,000 1,000

999 1,005.70

1.63% 1,060.00 1,067.15 1,060.00 0.09% 1,005.20 1,008.00 1,005.00 -0.08% 1,061.00 1,070.00 1,050.84

Contributed By: Mr. Pallab Das