The Indian market, with its vibrancy and growth potential, beckons investors seeking high returns. However, a well-balanced portfolio needs more than just the thrill of equities. Enter fixed income products – the steady Ed to the fiery Johnny of stocks!
Let’s explore why fixed income products deserve a spot in your investment strategy:
1. Predictable Returns: Unlike the roller coaster ride of stocks, fixed income products offer a pre-determined interest rate. This predictability allows you to plan your finances effectively and generate a steady stream of income, perfect for those nearing retirement or seeking a safety net.
2. Lower Risk: Compared to equities, fixed income products generally carry less risk. Since you’re essentially lending money to established entities like the government or corporations, the chances of losing your principal investment are lower. This makes them ideal for risk-averse investors or those with shorter investment horizons.
3. Portfolio Diversification: The key to a resilient portfolio is diversification. Fixed income products act as a hedge against market volatility. When stocks experience a downturn, your fixed income investments can help minimize the overall portfolio loss, offering a sense of stability.
4. Capital Preservation: Many fixed income products, like bank fixed deposits (FDs) or government bonds, come with a principal guarantee. This means you get your initial investment back upon maturity, offering peace of mind and ensuring your financial security.
5. Variety for Different Needs: The Indian fixed income market offers a wide range of options to cater to various risk appetites and investment goals. From low-risk government bonds to potentially higher-return corporate bonds, asset backed lease lease financing, securitized debt instruments, venture debt, etc. you can choose instruments that best suit your needs.
Let’s debunk some common myths
- Fixed income = Low returns: While returns may be lower than equities, they are also more predictable. Additionally, some fixed income products like tax-free bonds offer additional benefits.
- Not suitable for long-term: Fixed income products can be a great way to build a solid foundation for your long-term financial goals. They can provide a steady stream of income throughout your investment journey.
Things to Consider Before Investing in Fixed Income Products in India
Here are some key things to check before investing in fixed income instruments in India:
1. Creditworthiness is King:
- Credit Ratings: Check the credit ratings assigned to the bond by SEBI-registered credit rating agencies like CRISIL, ICRA, and CARE. Higher ratings (AAA, AA, A) indicate lower default risk, while lower ratings (BB, B) offer higher yields but come with a greater chance of the issuer failing to repay.
- Financial Health: Don’t just rely on credit ratings. Dig deeper into the company’s financial statements. Analyze their profitability, debt levels, and ability to generate cash flow. A strong financial position suggests a lower risk of default.
2. Balancing Risk and Reward:
- Yield vs. Risk: Generally, higher-yielding bonds carry more risk. Ask yourself if the extra return justifies the increased chance of default. Consider your risk tolerance and investment goals.
- Maturity Date: How long are you willing to invest? Corporate bonds come with varying maturity dates. Choose a maturity that aligns with your financial needs.
3. Don’t Forget Liquidity:
- Listed vs. Unlisted: Listed bonds trade on stock exchanges, offering greater liquidity. Unlisted bonds can be trickier to sell before maturity. Consider how easily you might need to access your invested capital.
4. Interest Rate Sensitivity:
- Interest Rate Movements: Bond prices generally move inversely to interest rates. If interest rates rise, existing bonds may become less attractive, potentially affecting their value.
5. Invest Wisely:
- Diversify: Don’t put all your eggs in one basket. Spread your investment across bonds issued by different companies and with varying maturities. Consider consulting a financial advisor for personalized guidance.
Some attractive options in fixed income available now.
1. Indiabulls Housing Finance LTD Tranche VI NCD Public Issue
| Title | Details |
| Issue opens | Friday, May 24, 2024 |
| Issue closes | Thursday, June 6, 2024 |
| Allotment | First Come First Serve Basis |
| Type of instrument | Secured, Rated, Listed, Redeemable, Non-Convertible Debentures |
| Face Value | Rs.1,000 per NCD |
| Issue Price | Rs.1,000 per NCD |
| Nature of Instrument | Secured Redeemable Non-Convertible Debentures |
| Minimum Application | 10 NCDs (Rs.10, 000) & in multiple of 1 NCD thereafter |
| Issue Size | Rs.200* Crs* ( *Base Issue Size Rs. 100 Crs with green shoes option of Rs 100 Crs) |
| Tenure | 24, 36, 60, 84, and 120 Months |
| Interest Payment frequency | Monthly, Annually, and Cummulative |
| Mode of Allotment | In dematerialised form |
| Listing | BSE & NSE |
| Lead Manager To The Issue | Nuvama Wealth Management , Elara Capital, and TRUST Investment Advisors |
| Deemed date of Allotment | As per approval from Board of Directors |
| Rating | CRISIL AA/Stable |
Coupon rate for retail investors (category IV )
| Interest | Monthly | Yearly | Cummulative |
| 2 Years | 9.25 % p.a. | 9.65 % p.a. | 9.65% p.a |
| 3 Years | 9.48 % p.a. | 9.90% p.a. | 9.90% p.a. |
| 5 Years | 9.71% p.a | 10.15% p.a. | - |
| 7 Years | 10.03% p.a | 10.50% p.a | - |
| 10 Years | 10.25% p.a | 10.75% p.a | - |
2. 360 ONE PRIME LIMITED NCD
| Title | Details |
| Issue opens | Monday, May 13, 2024 |
| Issue closes | Monday , May 27, 2024 |
| Allotment | First Come First Serve Basis |
| Type of instrument | Secured, Rated, Listed, Redeemable, Non-Convertible Debentures |
| Face Value | Rs.1,000 per NCD |
| Issue Price | Rs.1,000 per NCD |
| Nature of Instrument | Secured Redeemable Non-Convertible Debentures |
| Minimum Application | 10 NCDs (Rs.10, 000) & in multiple of 1 NCD thereafter |
| Issue Size | Rs.200* Crs* ( *Base Issue Size Rs. 100 Crs with green shoes option of Rs 100 Crs) |
| Tenure | 24, 36, 60, 84, and 120 Months |
| Interest Payment frequency | Monthly, Annually, and Cummulative |
| Mode of Allotment | In dematerialised form |
| Listing | BSE |
| Lead Manager To The Issue | Nuvama Wealth Management , Elara Capital, and TRUST Investment Advisors |
| Deemed date of Allotment | As per approval from Board of Directors |
| Rating | CRISIL AA/Stable |
Coupon rate for retail investors
| Interest | Monthly | Yearly |
| 18 Months | 8.86% p.a. | 9.16% p.a. |
| 24 months | 8.98% p.a. | 9.35% p.a. |
| 36 months | 9.16% p.a | 9.55% p.a. |
| 60 months | 9.21% p.a | 9.60% p.a |
| 10 Years | 9.44% p.a | 9.85% p.a |
Conclusion
Fixed income products are not a one-size-fits-all solution. Consider your risk tolerance, investment goals, and time horizon before incorporating them into your portfolio. Consulting a financial advisor can help you create a customized investment strategy that leverages both fixed income and equity products to achieve your financial dreams.
Embrace the power of stability! Invest in fixed income products and build a secure financial future in the dynamic Indian market.
