Bond Market: Untapped Potential for Investors

Bond is a debt capital, issued by the company to raise the funds from the market. Interest is paid to the subscriber on the face value of bond during its life and bond is redeemable at its maturity period. Therefore, bond is less riskier avenue for investment because return is almost assured specifically Government bond is considered risk free asset. Corporate bond holder has to face different types of risks such as inflation risk, interest rate risk, default risk and liquidity risk etc .Bond subscriber can adopt immunization, indexing and interest rate forecasting strategy. Post liberalization scenario in Indian bond market is significantly different from pre liberalization concept where bond market was quite illiquid in nature. This article discusses specially the concept of debt market and explains why investment in bond is an attractive offer for retail investor.It makes a comparative analysis between equity market and debt market and establishes the fact that bond subscriber has a comparatively lower risk than equity holder.It explains the some basic theoretical concept to the retail investor such as face value, market value, redemption value, yield and yield to maturity of a bond.The article focuses on the inverse relationship between interest rate and bond price as well as illustrate expectation hypothesis, the segmented market theory and preferred habitat theory. The bond is treated as a tax saving instrument.