Invest in Bonds
Bonds provide Portfolio Diversification,
Reliable Income, and Financial Stability
What Are Bonds?
Bonds are financial instruments issued by governments or companies to raise funds. By purchasing a bond, you’re essentially lending money to the issuer, who agrees to pay you periodic interest and return your initial investment when the bond matures.
Why Invest in Bonds?
Fixed-income securities offer consistent interest payouts and help lower overall portfolio risk.
Key Highlights
Steady Income Flow
Fixed-income securities offer investors a reliable and consistent income stream.
Secure Investment
Investors gain by protecting and growing their capital.
Strategic Asset Diversification
Bonds provide effective portfolio diversification, helping to reduce overall risk.
Steady Market Behavior
Bonds exhibit significantly lower volatility compared to equities and mutual funds.
Risk-Free Credit
Government bonds offer zero default risk, ensuring a secure investment.
Frequently Asked Questions
A bond is a debt instrument issued by governments, corporations, or other entities to raise capital. When you buy a bond, you are lending money to the issuer in exchange for periodic interest payments and the return of principal at maturity.
Key features of a bond include: Face Value (principal amount), Coupon Rate (interest rate), Maturity Date (when principal is repaid), Issuer (entity borrowing money), and Credit Rating (creditworthiness assessment).
Bonds are debt instruments where you lend money to earn fixed interest, while stocks represent ownership in a company. Bonds generally offer lower risk and steady returns compared to potentially higher but volatile returns from stocks.
Face value is the nominal amount of the bond, representing the principal that will be repaid at maturity, it is also called par value.
Coupon rate is the annual interest rate paid by the bond issuer on the face value. For example, a 10% coupon rate on a ₹1,00,000 bond means ₹10,000 annual interest payment.
Maturity date is when the bond expires and the issuer repays the face value to bondholders. Bonds can have short-term (less than 1 year), medium-term (1-10 years), or long-term (more than 10 years) maturities.
Advantages of a bond include Capital preservation, regular income stream, portfolio diversification, lower volatility than equities, higher priority over equity shareholders, and potential tax benefits.
Major bond issuers in India are Central & State Governments, Public Sector Undertakings (PSUs), Private Corporations, Banks, NBFCs, Financial Institutions, and Municipal Corporations.
Accrued interest is the interest accumulated on a bond since the last interest payment date. When buying bonds in secondary market, buyers pay accrued interest to sellers.
Secured bonds are backed by specific collateral or assets, while unsecured bonds (debentures) rely only on the issuer's creditworthiness and reputation.
You can invest through Centrum GalaxC Online Bond platforms (OBPPs).
Minimum investment varies by bond type: typically ₹1,000 to ₹10,00,000. Government securities require minimum ₹10,000, while corporate bonds may start from ₹10,000 to ₹1,00,000.
Yes, a demat account is mandatory for holding bonds in electronic form. All bond transactions require dematerialized format for safety and ease of transfer.
Yes, if you have a joint demat account, you can purchase bonds in joint names. The investment limits apply to the first holder in joint accounts.
Yes, KYC (Know Your Customer) is a regulatory requirement and mandatory for all bond investments.
Payment can be made through RTGS/NEFT, UPI for primary issues, online banking transfers, and designated payment gateways.
The types of Bonds available in India are Government Bonds, Corporate Bonds, Tax-Free Bonds, Capital Gains Bonds (54EC), Convertible Bonds, Zero Coupon Bonds, Perpetual Bonds, Floating Rate Bonds, and Sovereign Gold Bonds.
Government bonds are debt securities issued by Central or State governments to fund public projects. They are considered safest investments with sovereign guarantee.
Corporate bonds are debt instruments issued by companies to raise capital for business expansion, working capital, or debt refinancing. They typically offer higher yields than government bonds.
Tax-free bonds are issued by government entities where the interest income is exempt from income tax under Section 10 of Income Tax Act. Annual investment limit is typically ₹1.5 lakh.
Capital Gains Bonds (54EC) help save long-term capital gains tax on sale of property. Investment limit is ₹50 lakh from capital gains made in last 6 months, with 5-year lock-in.
Convertible bonds can be converted into equity shares of the issuing company under predetermined conditions, giving investors flexibility to participate in company growth.
Zero coupon bonds don't pay periodic interest but are issued at discount to face value. The difference between purchase price and maturity value represents the return.
Perpetual bonds have no fixed maturity date and pay interest indefinitely. They usually have call options allowing issuers to redeem them at specified dates.
Call option allows issuer to buy back bonds before maturity at predetermined price. Put option allows investors to sell bonds back to issuer before maturity at predetermined price.
Floating rate bonds have variable interest rates that reset periodically based on benchmark rates like repo rate, treasury bill rates, or other reference rates.
Bond prices are determined by prevailing interest rates, credit quality of issuer, time to maturity, supply and demand, economic conditions, and inflation expectations.
Yield to Maturity (YTM) is the total return expected if bond is held until maturity, considering current market price, coupon payments, and time to maturity.
YTM considers the bond's current market price and total returns until maturity, while current yield is simply annual coupon payment divided by current market price.
Coupon rate is fixed interest rate on face value set at issuance, while yield varies with market price changes. Yield reflects actual return at current market price.
Bond prices and interest rates have inverse relationship. When interest rates rise, existing bond prices fall, and vice versa. Longer maturity bonds are more sensitive.
Day count convention determines interest calculation between dates. Corporate bonds use Actual/Actual (actual days), while government securities use 30/360 convention.
No, rates shown are indicative and subject to change based on market conditions, availability, and demand-supply dynamics at the time of actual transaction.
Accrued interest = (Coupon Rate × Face Value × Days since last payment) / Days in coupon period. It compensates sellers for interest earned during holding period.
Factors influencing bond pricings are interest rate environment, credit rating changes, time to maturity, liquidity conditions, economic outlook, issuer-specific news, and market sentiment.
Returns on bond includes regular coupon income, capital appreciation/depreciation if sold before maturity, and reinvestment returns if coupons are reinvested.
Bonds are traded on BSE and NSE stock exchanges, Over-the-counter (OTC) markets, and through Online Bond Platform Providers (OBPPs).
You can sell it through stock exchanges if listed, bond platforms offered by Centrum GalaxC.
Most bonds follow T+1 settlement cycle (trade plus one day). Government securities and some corporate bonds may have T+0 settlement for faster processing.
Yes, listed bonds can be traded on BSE and NSE like stocks.
Bond trading hours typically follow equity market timings 9:15 AM to 3:30 PM on weekdays.
Bond markets are regulated by RBI (for government securities and monetary policy) and SEBI (for corporate bonds, market conduct, and investor protection).
Bond ratings indicate credit quality AAA (highest safety), AA, A, BBB (investment grade), BB, B, C (speculative grade), D (default). Rating agencies are CRISIL, CARE, ICRA.
Rating agencies assess and monitor credit quality of bond issuers, assign ratings, and provide ongoing surveillance. They help investors make informed decisions.
Government securities are debt instruments issued by Central/State governments. Types include Treasury Bills (short-term), Government Bonds (long-term), and State Development Loans.
Minimum investment in G-Secs is ₹10,000 (100 units) with maximum of ₹2 crores per auction for retail investors.
Yes, G-Secs can be sold before maturity on stock exchanges.
State Development Loans are securities issued by state governments to fund their fiscal requirements. They offer slightly higher yields than central government bonds.
Treasury Bills are short-term government securities with maturities of 91, 182, and 364 days. They are issued at discount and redeemed at face value.
SGBs are government securities denominated in grams of gold, issued by RBI on behalf of Government of India as alternative to physical gold investment.
Eligible investors are Resident individuals, HUFs, trusts, universities, and charitable institutions. NRIs cannot invest in SGBs.
NCDs are corporate debt instruments that cannot be converted into equity shares. They offer fixed returns and are typically listed on stock exchanges.
Secured NCDs are backed by company assets/collateral providing additional safety, while unsecured NCDs depend solely on company's creditworthiness.
Yes, existing demat account can hold bonds along with equity investments. All securities are held in the same dematerialized format.
Yes, nomination facility is available for bonds held in demat accounts.
