The number of debt investment options available to investors has increased dramatically in recent years. Investors can invest in debt instruments through mutual funds, stock exchanges, and a variety of other platforms. Municipal bonds are a new category of fixed-income securities available to investors.
The Nifty India Municipal Bond Index, India's first municipal bond index, was recently launched by the National Stock Exchange (NSE).
The Nifty India Municipal Bond Index tracks the performance of municipal bonds issued by Indian municipal corporations with investment-grade credit ratings over a range of maturities.
Municipal bonds issued in accordance with the Securities Exchange Board of India's (SEBI's) Issue and Listing of Municipal Debt Securities Regulations, 2015 are included in the index.
Currently, the index contains 28 municipal bonds issued by ten different issuers, all of which have credit ratings in the AA range. Weights are assigned to index constituents based on their outstanding amounts.
Municipal corporations, like any other company or government, can raise funds from the capital markets by issuing bonds. This can encourage municipal corporations to fund new projects and improve civic infrastructure while also encouraging them to become more financially responsible and governance-oriented.
The index is calculated using the total return methodology, which includes both the price return and the coupon return.
The index has a base value of 1000 and a base date of 1st Jan '21. The index will be reviewed on a quarterly basis, and is intended to serve as a benchmark for asset managers as well as a reference index for passive funds such as Exchange-Traded Funds (ETFs), index funds, and structured products.
THE HISTORY OF MUNICIPAL BONDS IN INDIA
This story is from the March 2023 edition of Beyond Market.
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This story is from the March 2023 edition of Beyond Market.
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