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The Retail Debt Market, in the new millennium, presents a vast kaleidoscope of opportunities for the Indian investor whose knowledge and participation hitherto has been restricted to the equity market.

The development of the Retail Debt Market has engaged the attention of policy makers, regulators and the Government in the past few years. The potential of the Retail Debt Market can be gauged from the investor strength of more than 40 million in the Indian equity market who have powered the tremendous growth and transformation of the stock markets in recent times. Recognizing this opportunity at a very early stage, BSE has consistently been in the forefront of the campaign for the creation of a Retail Debt Market and has expounded the potential and need for the retail trading in G-Secs in the past few years in various important forums and to the key regulatory authorities.

Emergence of the Retail Debt Market

It would surprise many to know that a retail debt market was at one point of time very much present in India. Right through the forties and the fifties and until the early sixties, a good proportion of the holdings of Government securities were concentrated with individual investors; available statistics indicate that more than half of the holdings in Government securities were concentrated with retail investors in the early 50s.Today, there exists an inherent need for households to diversify their investment portfolio so as to include various debt instruments, including Government securities. Retail investors would have a natural preference for fixed income returns and especially so in the current situation of increasing volatility in the financial markets. The Government Securities (G-Secs) are the one of the best investment options for an individual investor today in the financial markets due to the following factors:

  • Zero default risk - due to their sovereign guarantee, ensures the total safety of all investments in G-Secs
  • Lower average volatility in bond prices
  • Greater returns as compared to the conventional safe investment avenues like Bank Deposits and Fixed Deposits, which also contain credit risk
  • Higher leverage -Greater borrowing capacity against G-Secs due to their zero risk status
  • Better and greater features to suit a large range of investment profiles and investor requirements
  • Growing liquidity and the increased turnover in recent times in the Indian Debt Markets