A Boon for Retail Investors?
The Securities and Exchange Board of India's (Sebi) recent decision to reduce the face value of corporate bonds from Rs 1 lakh to Rs 10,000 has been met with optimism by market participants. This move is expected to make bond investments more accessible and appealing to a wider range of retail investors.
Previously, the high face value of corporate bonds acted as a barrier for many retail investors, limiting their participation in this segment of the market. With the reduced face value, bonds become more affordable and attainable, opening up new investment opportunities for individuals.
Experts believe that this change will accelerate the retailisation of the corporate bond market, leading to increased participation from individual investors. This, in turn, is expected to contribute to a more liquid and robust bond market in India.
The easier access to bonds also allows retail investors to diversify their portfolios and leverage the benefits of bonds, such as consistent income and reduced volatility compared to stocks.
However, some market participants have advocated for regulatory measures to mitigate the risk of mis-selling. They suggest imposing restrictions on the criteria for bond issuance, such as outstanding amount and issuer ratings.
Overall, Sebi's decision to reduce the face value of corporate bonds is seen as a positive step towards increasing retail participation in the bond market. This move is expected to benefit both investors and the Indian economy as a whole.