Strengthen your investment portfolio with carefully selected Bonds and Non-Convertible Debentures (NCDs). These investment options help create a balanced portfolio by improving diversification, reducing volatility and generating stable returns.
If you are looking to invest in high-quality Bonds and NCDs, choose DMK Wealth for expert guidance, transparent investment solutions and a seamless digital investment experience.
Invest Now
Understand the important factors to consider before investing in Bonds and Non-Convertible Debentures.
Bond prices generally move in the opposite direction of prevailing interest rates. If interest rates are falling, Bond prices are generally rising. In a rising interest rate environment, Bond prices will generally fall. If you are looking to benefit from a trade, buy when the yield is high with the expectation to sell when it is low.
The longer the maturity, the larger the swing in price in relation to interest rate movements. In a period of rising rates and declining prices, the long-term Bond funds will decline in value more than intermediate-term and short-term Bonds.
Credit Rating is an important factor that affects the Bond prices and yields just like an individual wanting to get a loan, Bond issuers must generally pay higher interest rates if their credit rating is poor. Therefore Bond investors must ensure the credit quality of the issuer.
There are two methods of buying a Bond.
Directly from Issuer
From the Secondary Market on Exchange
Buyers need to be aware of two primary aspects, market price and yield. Market price is what is quoted on an exchange for buying or selling, while the yield shows what you earn every year by holding the Bond. The yield is calculated by dividing the annual coupon or interest received by the market price.
Unlike stocks, where investors mainly expect profits from price appreciation, Bond investments focus more on the yield than the purchase price. The buy price is not always lower than the face value that is repaid at maturity. Therefore, investors should evaluate the yield carefully before investing.
Bond prices rise when yields fall and decline when yields increase. For example, if a Bond with a face value of ₹100 offers a 10% coupon and is sold after one year for ₹101, the effective yield becomes approximately 9.9%. Although the investor earns the coupon, the purchase price influences the actual return received.
Investors should therefore monitor both market price and yield while investing. Buying Bonds when yields are attractive may provide better long-term returns, whereas purchasing at very low yields may reduce future earning potential if market yields rise.
Investors can buy Bonds in India, and various types of Bonds are available to suit different investment goals. These include Tax-Free Bonds, where the interest earned is exempt from tax, Capital Gain Bonds (54EC Bonds), which provide capital gains tax exemption under Section 54EC of the Income Tax Act, Corporate Bonds, Government of India (GOI) Bonds, and many more.
Non-Convertible Debentures (NCDs) are also a popular investment option and are available in two categories: