For retail investors, the bond market is a more lucrative option compared to other fixed-income instruments. It’s about discipline—invest whenever you have surplus funds. Delaying an investment by even one day could result in lost interest that can’t be recouped. Bonds tend to offer better returns than other fixed-income instruments, regardless of interest rate outlook. In this game, every day counts. With OBPP platforms, retail investors can invest with a single click, making bond investments easier and more efficient.

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

"One notable development is the rise of Debt IPOs, where corporates tap retail investors in the primary market. Debt IPOs nearly doubled from ₹9,000 crores in FY’23 to ₹19,000 crores in FY’24. As retail investor interest grows, this segment could reach ₹50,000 crores in the next five years, contributing further to the market’s growth." said Bond Bazaar's Founder Suresh Darak in an exclusive e-mail interview with Zeebiz.com.

Suresh Darak is a Founder of Bondbazaar and also vice- chairperson of Online Bond Provider Platform (OBPP) association, with over 20 years of experience in the financial markets, Suresh is a recognized bond market specialist. His extensive career includes significant roles at leading institutions such as L&T Financial Services, where he honed his expertise and deep understanding of the financial industry. He is professional a Chartered Accountant.

How would a Trump victory impact the bond market, including interest rates, yields, and investor sentiment?

Trump's "America First" approach emphasizes domestic manufacturing and consumption, potentially causing inflation as costs rise due to reduced reliance on imports. His focus on defense, energy, AI, tax cuts, and tariffs adds to inflationary pressures. Despite a 75 bps Fed rate cut, 10-year US Treasury yields rose by 90 bps to 4.5%. Higher US yields could drive global yields upward, depreciating currencies as capital flows to the US. In India, this may pressure the rupee, and to stabilize the currency, the RBI might maintain interest rates, keeping India's yield curve steady but under watch.

What will be the Bond market outlook for 2025?

The Indian bond market is poised for significant growth, with an expected Compound Annual Growth Rate (CAGR) of 20 per cent over the next 10 years. As more corporates access the bond market, coupled with SEBI’s strong focus on deepening the corporate bond market, the outlook remains optimistic. Initiatives such as Corporate REPO, RFQ, and guidelines encouraging large corporates to tap into the bond market for borrowings are expected to foster steady growth.

Currently, annual issuance in the corporate bond market stands at approximately ₹10 lakh crores, with outstanding corporate bonds exceeding ₹45 lakh crores. This market has grown significantly over the past decade and is expected to continue expanding at a robust pace, doubling every four years.

One notable development is the rise of Debt IPOs, where corporates tap retail investors in the primary market. Debt IPOs nearly doubled from ₹9,000 crores in FY’23 to ₹19,000 crores in FY’24. As retail investor interest grows, this segment could reach ₹50,000 crores in the next five years, contributing further to the market’s growth.

This combination of strong regulatory support, increasing corporates tapping the bond market, and rising retail investor participation suggests a positive and sustained growth trajectory for the Indian bond market in the coming years.

How are Online Bond Platform Providers (OBPP) transforming investor experiences and simplifying access to the bond market?

Online Bond Platform Providers (OBPPs) are revolutionizing the bond market by simplifying access, offering education, and creating transparency. These platforms streamline the investment process—what once took 50+ steps now takes under a minute. OBPPs eliminate intermediaries like brokers and dealers, reducing costs and providing direct access to a wide range of bonds. Transparency is a key feature, with all bond-related information—ratings, rationale, cash flows—available online, enabling easy comparison. Through education, OBPPs highlight bonds as a viable alternative to traditional investments like FDs and Debt MFs. SEBI's efforts have further enhanced transparency and retail participation in the bond market.

Why should retail investors consider bonds as a safe and reliable investment option?

The bond market is regulated by SEBI, ensuring safety and reliability. Listed bonds adhere to SEBI guidelines, are rated by independent agencies, and are accessible via BSE and NSE, with secure exchange-based settlement. Securities are credited directly to investors' demat accounts, and issuers pay interest and principal directly to their bank accounts. Ratings act as a risk barometer, helping investors choose bonds based on their risk appetite. AAA-rated bonds are the safest, while lower-rated bonds offer higher returns. Even top-rated bonds typically yield better returns than FDs, making bonds a compelling investment choice.

How do bond yields in emerging markets differ from those in developed markets, and what are the implications for investors?

Bond yields in emerging markets are typically higher than those in developed markets due to higher inflation and risk premiums. Governments in emerging economies often offer higher interest rates to attract investors, as they need to outpace inflation, typically by 100-200 bps. In developed countries, where inflation is lower, interest rates are also lower. For instance, India’s bond yields have historically been 350-400 bps higher than US Treasury yields, but this gap has recently narrowed to around 250 bps due to falling inflation and India’s strong economic growth.

In light of these regulatory changes, what strategies would you recommend for institutional and retail investors to navigate the evolving bond market and minimize potential risks?

For retail investors, the bond market is a more lucrative option compared to other fixed-income instruments. It’s about discipline—invest whenever you have surplus funds. Delaying an investment by even one day could result in lost interest that can’t be recouped. Bonds tend to offer better returns than other fixed-income instruments, regardless of interest rate outlook. In this game, every day counts. With OBPP platforms, retail investors can invest with a single click, making bond investments easier and more efficient.

For institutional investors, their strategy will depend on the type of money they manage. In the current uncertain environment, caution is key. They are likely to avoid duration plays, as rising yields and geopolitical uncertainties make long-duration bonds riskier. Their approach will be more conservative to protect capital and minimize exposure to market volatility.

Can you explain the concept of yield-to-maturity (YTM) and its significance for bond investors?

Yield to Maturity (YTM) is the total return an investor can expect if a bond is held until maturity. For example, if you invest ₹100 and receive ₹10 as a coupon every year, the YTM is 10%. However, if the same ₹10 is paid quarterly (₹2.5 per quarter), the YTM increases to 10.30% due to interest being earned on the interim interest payments. This additional yield is the result of compounding the interim interest payments, making the bond slightly more attractive.

What is Zero – coupon Bond and how do they work?

Zero-Coupon Bonds (ZCBs) are issued at a discount and pay no periodic interest. Instead, investors receive the face value at maturity, earning the difference as interest. For example, a 10-year ZCB bought for ₹50,000 matures at ₹1 lakh. ZCBs can qualify for favorable tax treatment if issued by infrastructure entities or public sector companies after June 1, 2005, meet specific criteria, and are government-notified. Bonds from private or non-infrastructure entities are taxed normally. ZCBs are ideal for investors seeking long-term returns without periodic payouts.

The journey of Bondbazaar, and vision to drive its mission in the bond market?

Retail investors traditionally have limited access to the bond market, often focusing on instruments like FDs and debt mutual funds, which offer yields of 7-8%. For higher returns, they tend to shift to equities, which come with greater risk and uncertainty. However, there is a gap in the 8-12% return range that provides fixed returns in a safe and reliable manner. BondBazaar aims to bridge this gap by offering retail investors direct access to the bond market, helping them earn competitive returns with lower risk.

At BondBazaar, our mission is to transform the way individuals invest in bonds, making the process simpler, more transparent, and accessible through education, partnerships, and innovation.

Our USPs include:

Access: Our platform offers access to over 12,000 bonds (both corporate and government) with yields ranging from 7% to 15%, enabling customers to start investing with as little as INR 100.
Simplicity: With one-click buying and selling on an exchange platform, our yield-based trading system allows investors to manage their investments with ease.
Marketplace: A true marketplace where investors can not only buy but also sell bonds, offering flexibility and convenience.

BondBazaar is committed to providing a transparent and efficient trading platform that empowers investors to make informed decisions. With a user-friendly interface and real-time market data, we enable investors to trade confidently. Our team of seasoned professionals has extensive experience in the Indian bond market, and we are passionate about leveraging technology to solve complex financial challenges. Our goal is to demystify the bond market for retail investors, making it accessible to everyone—from novices to seasoned professionals.