Budget proposal: Will market-making give India’s corporate bond the fillip it has long needed?

Subscribe to enjoy similar stories. One significant announcement in the budget relates to the introduction of market makers in India’s corporate bond market. This idea has been around for some time, with the Securities and Exchange Board of India (Sebi) having released a paper on it.

Market makers are entities that get certain benefits for creating liquidity in a market. As a corollary, once this is enabled, retail access gets easier. In the government securities (G-Sec) market, for example, primary dealers do this job when they subscribe to primary issuances.

In the secondary market, they provide ‘buy’ and ‘sell’ quotes. This means that they hold on to securities and place them on offer for buyers to purchase. They take the risk of price changes but get regulatory benefits in return.

This gives G-Secs liquidity. This is the theoretical part. Let us look at India’s G-Sec market.

There are presently about 120 issued securities of long-term tenure with a combined outstanding liability of around ₹120 trillion. Specific amounts vary across securities depending on their importance. While this market is liquid, this is unevenly so.

In the first nine months of 2025-26, for example, data shows that almost 60% of the trading was in 10-year paper, while another 18-20% was distributed across 5- and 15-year bonds. The rest were quite insignificant. This means that even market-making does not work fully for a majority of issued G-Secs.

Notably, only benchmark securities trade in high volumes. Even with these, it is the 5, 10 and 15-year securities that top the list. The rest are usually dormant.