Are there any liquid government securities to buy?

Trading
1

Hi, can anyone please share any liquid government securities to buy?

I have looked for many but all were illiquid with no sellers?

2

Usually, the govt. securities listed on the exchanges are very illiquid.

Your options are to either go for gilt funds or use the RBI retail direct platform.

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3

Is RBI Retail Direct liquid. Do u have first hand experience of the same?

4

I don’t have a first hand experience but the RBI platform works slightly differently. You don’t have a market depth in it but instead you do an RFQ, which is Request for Quote. The dealers who are majorly banks, will then give you a quote at which they’re willing to buy or sell.

You can try it out with a small amount and see whether it works for you. Otherwise, getting into a gilt index fund is just simpler. Personally, I’ve invested in the IDFC 2027 gilt index fund and pledged it. It’s also treated as cash equivalent like liquidbees.

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5

Are the risks and rewards associated with Gilt Funds identical to G-Secs?

6

@cvs is the go to guy on this matter, i can vouch for this

7

@jatingarg What is the intent behind looking to invest in liquid GSECs?
a. Do you wish to sell them off a specific later date? (eg. a certain life-event you need the funds for?)
b. Do you wish to sell them off a unknown date in the future? (eg. whenever the price of a certain stock you want to buy, takes a dive?)
c. Something else?..

(Based on the further details of the above a/b/c,
and the amount of investment involved
it might be possible to identify certain GSECs that meet the expectations)

While a Gilt-fund might look like an easy alternative,
risks/challenges with Gilt-funds would be…

  • Investing in them when the interest-rates are expected to rise in the future will result in negative returns. [1]
  • Also one faces all the overheads/limitations of a Mutual fund too. eg. Exit-load, Expense-ratio. [2].

Also, the taxation for majority of the returns differs between GSECs and Gilt-funds.

  • GSECs
    – Semi-annual dividend/interest received taxed as per income-tax bracket.
    – any gains on maturity taxed as STCG/LTCG depending on time between investment and maturity (or sale).

  • Gilt-funds
    – All income taxed as STCG/LTCG depending on time between investment and redemption.
    (Note: Some Gilt funds may offer dividend payout option. This is taxed as per regular income-tax bracket)

8

Hi @cvs

The intent is to park the money (to earn some secured and fixed returns) and to get the margin by pledging it. I am looking for 10L for now.

The reasons why I am essentially looking for liquid securities are: A. they might be available at a discount (similar to SGBs) and B. to have the option to exit if I need to invest somewhere else.

Overall, I am looking for the best option to invest in some fixed return and pledge for margin. So kindly suggest that POV.

I have learnt that Gsec is a good option.

Next best, I might look for liquid funds. I do not prefer liquid-bees due to their unclear and a little complex way of delivering returns. (It might just be my mental block.)

Hence, if you can, please also suggest whether I should go for liquid funds or liquid bees, if not Gsecs.

Just an FYI, as of now I have split my investments into liquid investments and SGBs for this purpose. I’m looking for confirmation if Gsec (and/or liquidbees) is a better route.

9

Instead of Liquid funds, you can consider Money-mkt funds fwiw.
For long-period maturities, Gilt funds. ( All can be pledged, check the pledge list before buying )
Most if not all MF have Growth and Dividend options.

Whatever funds you choose, go for growth option in funds if you dont want tax overheads every year.
Anything that pays Dividends will attract tax liabilities like g-sec, liquid bees etc frequently so they are not bad if one has small income but interest gets added to income so returns diminish for ppl in higher tax brackets.

10

I haven’t really looked into this yet, but it’s been on my mind for a while. I’m going to check this out soon. You have to make sure that the growth is worth it.

11

Hello. I will also be in your situation in the next few months. In case your research yielded any good solution, please do share it. Thanks in advance.