What is corporate bonds in India understand with example with investment perspective

Corporate bonds are debt securities issued by companies to raise capital from the market. These bonds are issued by companies to finance their various activities, such as expansion plans, research and development, and working capital requirements.

In India, corporate bonds are regulated by the Securities and Exchange Board of India (SEBI) and are traded on stock exchanges such as the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The corporate bonds market in India is a significant part of the overall debt market, and it offers a range of investment opportunities to investors.

Investing in corporate bonds can be an attractive option for investors who are looking for regular income with relatively low risk. The interest paid on corporate bonds is usually higher than that offered by government bonds, making them an attractive investment option.

Let's take an example to understand the investment perspective of corporate bonds in India. Suppose a company ABC Ltd. issues a bond with a face value of Rs. 1,000 and a coupon rate of 8%. The bond has a maturity period of 5 years, which means that the investor will receive interest payments every year for 5 years, and the principal amount will be repaid after 5 years.

If an investor purchases this bond at face value, i.e., Rs. 1,000, he/she will receive interest payments of Rs. 80 per year (8% of Rs. 1,000). At the end of 5 years, the investor will receive the principal amount of Rs. 1,000.

Now, let's assume that the investor wants to sell the bond before maturity. In this case, the price of the bond will depend on various factors such as interest rates, credit ratings of the issuer, and market conditions. If the interest rates in the market have increased, the price of the bond will decrease as investors will demand a higher yield to compensate for the increased risk. On the other hand, if the credit rating of the issuer has improved, the price of the bond will increase as investors will have more confidence in the issuer's ability to repay the debt.

In conclusion, corporate bonds in India offer investors an attractive investment option with relatively low risk and a regular income stream. However, investors should carefully consider the credit ratings of the issuer, interest rate movements, and market conditions before making an investment decision

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