Top 5 Safest Bonds Investment Options In India 2022

The Indian economy has been predicted to grow at a rate of 7% in the coming year. And with this rapid economic growth, there will be corresponding demand for investments. Bonds are an investment option that provide a safe and steady return. In this article, read on to know the top 5 safest bonds investment options in India 2022.

Introduction

India is a land of contrasts. From the snow-capped Himalayas to the tropical beaches of the south, the country has something for everyone. And when it comes to investments, there are plenty of options available as well.

For those looking for a safe and secure investment option, bonds are a good choice. Bonds are debt instruments issued by corporates or the government to raise capital. They are typically issued for a period of 5-10 years and offer regular interest payments, making them an ideal investment for retirees or those looking for a steady income stream.

There are various types of bonds available in India, such as government bonds, corporate bonds, and tax-free bonds. Government bonds are considered to be the safest option as they are backed by the full faith and credit of the government. Corporate bonds are issued by companies and carry a higher risk than government bonds but offer higher returns as well. Tax-free bonds are issued by public sector entities and offer interest payments that are exempt from taxes.

Depending on your investment goals and risk appetite, you can choose from a wide range of bond investment options in India. Here is a list of some of the best options available:

1) Government Bonds: These include schemes like the National Savings Certificate (NSC), Public Provident Fund (PPF), Kisan Vikas Patra (KVP), etc. They are backed by the Indian government and offer guaranteed returns with minimal risk. NSCs

An Overview of the Indian Bond Market

The Indian bond market is the third largest in the world, with a total market size of over Rs. 140 trillion (US$2.1 trillion). It is also one of the most liquid markets, with a turnover of Rs. 12 trillion (US$180 billion) per day. The Indian bond market has two segments – the government securities (G-Sec) market and the corporate bonds market.

The G-Sec market is the largest segment of the Indian bond market, with a total outstanding amount of Rs. 100 trillion (US$1.5 trillion). The G-Sec market comprises government bonds issued by the Reserve Bank of India (RBI) on behalf of the Government of India, and includes bonds such as Treasury bills, dated securities, and State Development Loans (SDLs). The RBI is the primary dealer for all G-Secs.

The corporate bonds market is the second largest segment of the Indian bond market, with a total outstanding amount of Rs. 40 trillion (US$600 billion). Corporate bonds are issued by companies to raise funds for their business activities. These bonds are typically rated by credit rating agencies and are traded on stock exchanges or over-the-counter markets.

The Top Five Bonds Investment Options In India 2022

1. Government of India Bonds: The safest and most guaranteed bonds investment option in India are the government bonds. The Indian government offers a wide variety of bonds with different maturities and interest rates.
2. State Government Bonds: Another safe and secure option for bond investments in India are the state government bonds. These bonds are issued by the various state governments in India and offer good returns with low risks.
3. Corporate Bonds: Corporate bonds are also a good option for bond investments in India. These bonds are issued by companies to raise funds for their business operations. Corporate bonds offer higher returns than government bonds but carry more risk.
4. Infrastructure Bonds: Infrastructure bonds are a good option for long term investment in India. These bonds are used by the government and private sector to finance infrastructure projects such as roads, bridges, power plants etc. Infrastructure bonds offer good returns but carry high risks.
5. Mortgage-Backed Securities: Mortgage-backed securities (MBS) are another good option for bond investments in India. MBS are created when banks pool together home loans and sell them as securities to investors. MBS offer good returns but carry moderate risks.

A concluding discussion on stocks and bonds

It is always better to have a diversified portfolio which includes both stocks and bonds. While stocks are considered to be more risky investments, bonds are relatively safer. In the current scenario, it is advisable to invest in government bonds as they offer stability and security.

Government bonds or G-Secs are debt securities issued by the government of India. They are considered to be one of the safest investment options in India as they are backed by the government. G-Secs are available in different maturities ranging from 1 year to 30 years. Investors can choose the maturity period based on their investment horizon and risk appetite.

G-Secs offer fixed income and are less volatile than stocks. They also provide liquidity as they can be easily sold in the secondary market. Interest earned on G-Secs is exempt from tax. Hence, they are an attractive investment option for investors looking for safe and tax-efficient investments.