Which are the Best Bonds to invest in India?
“Never depend on a single income. Make investment to create a second source.”
- Warren Buffet.
To meet our ever-growing financial needs, it is imperative that we
consider making money through a second
source. There are many investment options where an investor can invest his
hard-earned money. Bond is one of them.
Bonds are a type of debt instrument issued by governments and
corporates to raise money for their current expenditure needs and finance their
In return, the issuer will provide a fixed rate of return (coupon) as
well as the money you initially loaned them (principal).
Due to this, bonds are considered safe as compared to other
Within bonds, there are many options available. Let us get an
best bonds for investment in India.
Types of Bonds
Various bonds are available in India issued by different issuers
basis on their coupon rate (%), security profile, maturity profile with
different ta options.
a. Government Bonds (GOI)
The Central and State Government of India require funds for their
expenditures, so they issue bonds which are called Government bonds.
Government bonds come with a long maturity, usually 5 to 40
years, and they fall under the category of Government securities (G-Sec).
In India, these bonds are issued by the Reserve Bank of India (RBI) and
carries a sovereign rating which is highest. Due to this, they are the safest
However, they carry an inflation rate risk, i.e., the returns
earned by you from the bond might not beat inflation in the future.
Investors can invest in Government Bonds through RBI’s Retail Direct
or through their debt brokers. If you are willing to invest in Government Bonds,
Different type of GOI securities
b. Corporate Bonds
A corporate bond is debt issued by a company in order for it
to raise capital. An investor who buys a corporate bond is
effectively lending money to the company in return for a series of interest
payments, but these bonds may also actively trade on the secondary market.
These bonds have a different maturity profile range from 1
year- 20 Years and are generally medium to long term debt instruments.
In India, corporate bonds constitute a large portion of the
bond market. Companies issue debt as through this, they can raise
money at a lower cost and without any dilution of their share capital.
However, corporate bonds carry a higher default risk than
government bonds; therefore, they provide a higher return.
Some of the borrowers and issuers of bonds are NHAI, REC, PFC,
NTPC, NHPC, HDFC Limited, Reliance Industries, Muthoot Capital, L&T finance,
ICICI bank, etc.
A corporate bond can be either an investment grade or
non-investment grade bond, depending on its credit rating.
AAA, AA, A, and BBB are investment-grade bonds, and BB to D are
non-investment-grade bonds (also known as high-yield bonds or junk bonds).
If you are willing to invest in corporate bonds, click here.
Some of Best traded Corporate Bonds is:
c. Tax-Free Bonds
As the name suggests, tax-free bonds are free from
taxation. So, the interest earned by the investors on these
instruments will be fully exempted from tax as per the Income Tax Act.
The Government issues these bonds for a specific objective,
such as infrastructure and housing projects. An example of this bond is
Tax-free bonds are considered to have very low
default risk and have a maturity of 10-20 years.
If you are willing to invest in Tax-Free Bonds, click here.
Some of Best Tax-Free Bonds are: -
d. Zero-Coupon Bonds
Zero-coupon bonds are those bonds that do not provide any
regular interest payment to the investor and paid along with the principal
amount at the time of Principal amount.
Zero-coupon bonds (Deep Discount Bonds) are redeemed
at par but are issued at a discount to their fair value.
So, the difference between the price at which the bond is
issued & the price at which it is redeemed (par value) is the investor’s
profit or interest.
For example, if the par value of the bond is Rs. 1000 and the
issue price is Rs. 800, then the difference of Rs. 200 will be the profit of
If you are willing to invest in zero-coupon, click here.
Some of Best zero-coupon are: -
Who can Invest in Bonds Online?
An Indian Citizen or an NRI can invest in bonds in India.
It is always advised that an investor diversifies his portfolio
to minimise his risk. Therefore, every investor should buy bonds in their
portfolio. Bonds are not just for retired individuals or individuals
who are not willing to take a risk. It can be bought by everyone depending
on their goals and risk profile.
An investor can invest in bonds in the primary market
(subscribing to the public issue) or secondary market (from exchanges where
they are traded).
The minimum amount required to buy bonds varies from platform
With BondsIndia, you can start investing with just Rs.
1000. To open your account now, click here.
What to know before Buying Bonds in India?
It would be best to analyse the risk involved in the bond and what
return they can provide. These factors should be examined after
taking into account your risk profile.
Before giving a loan, i.e., buying a bond, you should carefully
evaluate the issuer. You should check whether he will be able to
repay your principal and interest amount. In order to do this,
review the financial statements of the issuer.
You should invest in a bond only after considering the
investment horizon up to which you expect to hold the
“Don't put all your eggs in one basket”. You all might have heard this
This proverb should be the basis for creating your portfolio.
An investor should not invest all his money in a single asset, he should
diversify his portfolio. A well-balanced portfolio could help him minimise
One of the good characteristics of a bond is that it is good for
diversification. Stocks and bonds have a negative correlation. Therefore,
in your portfolio can minimise your loss in case of an economic
It is generally seen that when the stock market comes in a bear market, the
demand for bonds starts increasing. Bonds will also provide you with a fixed
income during an economic downturn, which will further help you meet your
If you have any queries related to bonds, which type of bonds to invest in,
how to start investing in bonds, the right platform to invest in,
regulations relating to bonds, etc. you can contact
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