Middle-class savings could now go into directly buying government bonds after the central bank Monday allowed retail investors to buy into sovereign debt through dedicated accounts that wouldn’t attract costs.
Rich investors are booking profits in tax-free bonds as yields have dropped to 4.3-4.5%. Some of them are moving to the Bharat Bond ETF, a portfolio of public sector companies with a AAA rating. “Investors can earn a 6% post-tax return in the Bharat Bond ETF series that matures in 2030 and 2031.
Appetite for fixed income products like non-convertible debentures (NCDs) and select debt mutual funds is likely to increase among individuals who have not been filing tax returns. This follows a Union Budget announcement in February that requires individuals who have not filed tax returns for the previous two financial years
Akshaya Tritiya has become synonymous with gold buying. You can use the occasion to add gold to your portfolio. According to investment advisors, investors should have a 5-15% allocation to gold, depending on their preference for the yellow metal.
Debt returns have been rather depressed, with rates plunging to record lows. So, how does one earn more from this asset class – at least more than the headline inflation rate? One way to do this is to buy into MLDs (market-linked debentures), now offered by the likes of Piramal Finance or Shriram Transport Finance.
Mutual funds could stay away from buying new issuances or existing papers that would have a call maturity beyond March 2023 after the Securities and Exchange Board of India’s revised guidelines still left a gap between the suggested and market valuations of these instruments.
Depending on the quantum of selling, yields on bank perpetual bonds could surge 50-100 basis points. The spike will be even higher in the case of NBFC perpetual bonds.
Investment trusts are finding few takers as yields on these debt-like instruments barely match the risks associated with them when compared with risk free returns from government or triple A rated bonds.
If RBI is able to address the issue of liquidity and ease of investing through the new platform, we can have a vibrant market for all stakeholders.
Retail investors looking for high yield on their fixed income investments typically find investments in government bonds unattractive.