Bonds have become more attractive than FDs of banks, and the environment of rising interest rates has made the country's debt market attractive
For the last three days, there has been a slight lull in the bond market, but despite this, given the volatility in the stock market and other financial markets, there is a buoyancy. The reason behind this is that interest rates are increasing in all the major economies of the world including India, and America, and this round is likely to continue. Whenever interest rates rise, so does the return of the bond. At present, the returns on bonds with a 10-year maturity in the Indian bond market are more than 7.40 percent, which is better than the deposit tenure of banks. In such a situation, retail investors are being advised to invest a part of their total portfolio in bonds.
Bond investing has always been considered a low-return but safe investment option. Nish Bhatt, the CEO, of Millwood Cane International, says that till a few months ago, interest rates in India were at the lowest level. There was excess liquidity (funds) available with the banks. Now the process of increasing interest rates has started. This is a win-win for investors investing in all types of debt instruments. He said the return on 10-year bonds is at 7.4 percent. Given the manner in which the RBI is raising interest rates, the returns on bonds are likely to be higher than the current levels. Investors should invest a portion of their total portfolio in bonds to take advantage of this environment. While fixed deposit schemes of banks can be considered the safest in terms of stability, bond returns are sometimes influenced by domestic and global conditions.
Returns on bonds remain within a certain range
Investing in equity or stock market means that we are buying a specific stake in that company. On the other hand, when we invest in bonds issued by a company, government, or any other agency, it means that we provide them with a loan. That's why they are also called debt instruments. They never fluctuate like the equity market. The returns on these fluctuate up and down within a certain range. Hence these are considered safe returns. Ordinary clients can invest in bonds through a broker or through mutual funds. RBI has also started the facility of direct investment in government securities.