Investors Take To RBI Retail Direct Platform In Search Of Better Fixed Returns
Published by Outlook Money
Abhishek Kumar's role: Quoted
Abhishek Kumar said investors are moving from deposits and debt funds to direct sovereign debt for its lower costs and safety, and cautioned that trading bonds rather than holding them exposes investors to interest rate risk.
What Abhishek Kumar said
Why are investors moving from fixed deposits and debt funds to government securities?
What we are seeing is money moving out of bank deposits and debt mutual funds and into sovereign debt held directly. For long-term holders, G-secs carry no expense ratio and have a stronger safety profile, which makes them more attractive than debt funds. Investors are putting safety and cost-efficiency first and cutting out intermediaries. Many may also be looking for the predictability that government backing gives, to bring balance to their portfolios now that easy gains in stocks are fading.
How has the RBI Retail Direct portal changed access to government bonds?
The portal has made it easy to take part in primary auctions, and that has lowered the barrier to entry for people who earlier kept their money in savings accounts with low yields. I also noted that bringing state development loans and sovereign gold bonds onto the same platform is pulling more retail wealth into the RBI's ecosystem.
What should retail investors watch out for if they trade government bonds?
Retail investors are no longer simply holding bonds until maturity; more of them are now trading them. That is a change worth noting, but it also leaves them open to interest rate risk, since the price of a bond moves when rates change. Anyone planning to trade bonds rather than hold them should factor that risk into their plans.
In our words, from what he said in the piece. General information, not personal advice.
More of Abhishek's views on saving and deposits
Retail investors are increasingly buying government securities through the RBI Retail Direct platform, with account numbers and primary market subscriptions rising sharply. The article compares sovereign bonds with fixed deposits, notes lower direct equity holdings, and reports higher secondary market trading.
Publisher source
Investors Take To RBI Retail Direct Platform In Search Of Better Fixed Returns