NSE subsidiary launches India’s first ever municipal bond index

NSE’s index services subsidiary, NSE Indices Limited today launched India’s first ever municipal bond index, the company said in a media release.

Launched as Nifty India Municipal Bond Index at a SEBI workshop in Bengaluru, this debt securities will track the performance of municipal bonds issued by Indian municipal corporations across maturities and having investment grade credit rating, the release said.

The index includes municipal bonds issued as per the Securities Exchange Board of India Issue and Listing of Municipal Debt Securities Regulations, 2015, the release said.

The launch of the Nifty India Municipal Bond Index- India’s first ever Municipal Bond Index aligns with NSE’s vision to provide market representative benchmarks, Mukesh Agarwal, CEO at NSE Indices said. “The municipal bond market has a potential to play a pivotal role in financing the borrowing requirements of different municipal corporations in India,” he added.

Presently, the index has 28 municipal bonds issued by 10 issuers all having credit rating in the AA rating category, the release further said. The index constituents are assigned weights based on their outstanding amount.

The Indian municipal bond market has seen a resurgence of issuances after the SEBI Issue and Listing of Municipal Debt Securities Regulations, 2015 came into effect, giving a much-needed impetus to municipal finance, the release claimed.

Municipal corporations use this route for raising money to fund new projects and improve civic infrastructure.

The index is computed using the total return methodology including price return and coupon return. The index has a base date of 01 January 2021 and a base value of 1000, the release said. The index will be reviewed quarterly.

The index is expected to act as a benchmark for asset managers and be a reference index tracked by passive funds in the form of Exchange Traded Funds (ETFs), index funds and structured products, the release said.