The bond market in India, today, stands at around $1.8 trillion, which is further split into $1.2 trillion for government securities and $0.6 trillion for corporate bonds. 

Over the past year, there has been a growth in the corporate bond market with an increase by 18 to 20% in the space of private and public placement issuances as compared to the previous year. 

The role of the Government in the Bond market

Based on current Parliamentary discussions, the Government is looking to raise an amount of Rs 43.6 lakh crores in order to build up the country’s infrastructure. A point to be noted here is that the focus for raising money for these PSU projects is through retail investments. 

A key initiative that the Government also launched was asset monetization plan that was announced during the Budget ‘22. The asset monetization plan aims to leverage the assets in the country, which can be monetized including ports, mines, highways, and railways. These are now being monetized in the form of trusts, which raise capital from retail and give it to the organization through which it can scale up further. 

An example of this is the national highways, the largest asset that is undergoing monetization. The recent NCD IPO raised by the National Highway Infrastructure Trust (NHIT), saw a gain of Rs 1,200 crores worth of funds from, both, retail and corporates, with a huge participation from retail. 

The Government is further encouraging retail investors to invest in bonds through further issuances by the NHIT and other such trusts. 

As a part of this, the Government also opened up a direct application for Government Securities when they are freshly issued. They launched an online platform called RBI Retail Direct, where investors can invest with as low as Rs 10,000 into the Government Securities – which garnered a huge attention from investors this year. 

Such initiatives by the Government are indeed going to encourage large-scale retail investment participation in the coming year.

Private Participation in the Bond Market

In the private sector as well, there has been remarkable development wherein the SEBI announced several initiatives, which were implemented in this year, to help widen and deepen the bond market. While all this while, around 90% of bonds that came in from the corporate world through private placement had a face value of Rs 10 lakh, this will change effective January 2023. Corporates will be able to issue bonds at a face value of Rs 1 lakh. This will indeed help bring the bond market closer to retail investors. While the growth of the bond market is something that has to be looked at, SEBI is working with an aim to reduce the initial price of each bond and thus lower the value of bonds for private placements, allowing greater retail investors to participate in these bond issuances. 

The increase in participation of corporates in the bond market will lead to a simultaneous growth of the bond market and further promote the opening up of more avenues for institutions to participate. An example of this is the recent Municipal Bond launched by the Indore Municipal Corporation, looking to issue bonds to the tune of Rs 246 crores through public issuance. While this has been a multi-billion dollar market in the US, India is gradually catching up on that front, especially with Municipal Bonds. 

The role of the retail investor 

The awareness amongst the retail investors has increased multifold from what it was a couple of years back. With more information around various segments of investment now readily available for the retail investor, there is a gradual shift towards investments in bonds for diversification of regular income to cushion oneself against any rainy day and build up assets safely. 

Moreover, with the participation ticket size overall in the bond market coming down, it will encourage more retail investors to enter into this space. Our own data has shown a steep increase in the number of retail investors coming into the bond market for the first time, especially with newer bond issuances. 

All these initiatives, both by public and private entities, will ensure the growth of the bond market to more than one and a half times in comparison to the current size of the market. The coming year is surely going to be a promising one for the bond market, and will be one to look out for! 

(By Abhijit Roy, CEO and Co-founder, GoldenPi Technologies. Views expressed above are personal)