Corporate Bonds: A viable option for investors seeking stable returns, portfolio diversification

financialexpress.com:

Foreign investors are increasingly interested in the Indian corporate debt market as domestic government securities are set to debut on the JPMorgan Emerging Market local currency debt index on June 28, expected to bring in $20-25bn in passive inflows. Recent data indicates higher purchases in corporate bonds and ETFs, along with a strong demand for dollar bonds. Despite the current investments remaining tepid, investors can anticipate an uptick as more foreign investors engage with Indian debt instruments, which have traditionally been overlooked in favor of government bonds.

With the increased interest from global fixed income investors, market participants hope the inclusion in the global bond index will boost liquidity and drive further interest in Indian corporate debt. Some foreign fund managers are even considering launching ETFs focused on this sector. Additionally, investors have shown interest in dollar bonds of Indian companies, with companies paying lower interest on these bonds than their initial guidance.

The Indian bond market has reached a remarkable value of ₹205.3 lakh crore (approximately $2.5 trillion) as of September 2023. Government bonds dominate, holding 78% of the market due to their low-risk nature and high investor trust. Corporate bonds account for 22%, reflecting private enterprises’ participation in capital raising. The bond market has grown 77% in the past five years, driven by factors like economic expansion, policy reforms, infrastructure investment, and increased investor awareness. These elements have boosted investor confidence and demand for fixed-income securities, contributing to the market’s robust growth.

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