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Learning Center


  • The Debt segment also like equity trading can be looked as having a primary market where the certificates are issued for the first time and a secondary market where the certificates are traded.
  • There is no single location or exchange where debt market participants interact for common business. Participants talk to each other, conclude deals, send confirmations etc. on the telephone, with clerical staff doing the running around for settling trades. In that sense, the debt market is a virtual market.
  • The major players in the Indian debt markets today are banks, financial institutions, insurance companies and mutual funds.
  • The instruments in the market can be broadly categorized as those issued by corporates, banks, financial institutions and those issued by state/ central governments.
  • The risks associated with any investments are - credit risk, interest rate risk, settlement risk and liquidity risk.
  • The market is best understood by understanding the elements and their mutual interaction. These elements are as follows:
    • Instruments. The instruments are the certificates issued in tradable form
    • Issuers. Entities, which issue these instruments. Primarily Companies, Government
    • Investors. Entities, which invest in these, instruments or trade in these instruments.
    • Interventionists or Regulators. Depending on the period to maturity, the Debt regulators may be RBI, SEBI and DCA


In the current climate, when there is uncertainty over almost every aspect of life, investment is not an exception. The gloomy market scene has led many potential investors to shy away from plough-back of their money. In what one can take refuge in such circumstances are fixed income instruments. Fixed-income instruments mainly comprise of company bonds, company fixed deposits, convertible & non-convertible debentures and tax-free bonds. At the most basic level, a bond is a loan. Just as people obtain a loan from the bank, governments and companies borrow money from citizens in the form of bonds. A bond really is nothing more than a loan issued by you, the investor, to the government or company, the issuer. For the privilege of using your money, the bond issuer pays something extra in the form of interest payments that are made at a predetermined rate and schedule. The interest rate often is referred to as the coupon, and the date on which the issuer must repay the amount borrowed, or face value, is called the maturity date. The primary goal of the bond market is to provide a mechanism for long term funding of public and private expenditures. The most important advantage of investing in bonds is that it helps diversify and grow your money.

The Bond Market in India with the liberalization has been transformed completely. The opening up of the financial market at present has influenced several foreign investors holding up to 30% of the financial in form of fixed income to invest in the bond market in India. The bond market in India has diversified to a large extent and that is a huge contributor to the stable growth of the economy. The bond market has immense potential in raising funds to support the infrastructure development undertaken by the government and expansion plans of the companies. The bond market in India plays an important role in fund raising for developmental ventures. Bonds are issued and sold to the public for funds.


Money is secured

Investing in debt is safer than investing in equity. The reason for this is the priority that debt holders have over shareholders. If a company goes bankrupt, debt holders are ahead of shareholders in the line to be paid. In a worst-case scenario, such as bankruptcy, the creditors (debt holders) usually get at least some of their money back, while shareholders often lose their entire investment. 

Predictable returns

By owning bonds, retirees are able to predict with a greater degree of certainty how much income they will have in their golden years. An investor who still has many years until retirement has plenty of time to make up for any losses from periods of decline in equities.

Offers better returns

The interest rates on bonds are typically greater than the rates paid by banks on savings accounts. As a result, if you are saving and you do not need the money in the short term, bonds will give you a relatively better return without posing too much risk.