After buying it from other sites it goes to zerodha dmat account. Can be pledge these ?
Considering it has to be part of approved list
what is the rationale for doing this
I found one more website bondsindia.com
one of the website thefixedincome.com has min. order of 10 lac
@curiousvi yes you can - if you buy like 5 lakhs or 10 lakhs you can get good price - in some website they can split
you can buy
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What if someone needs money for emergency then how can we sell these bonds. There is no liquidity on the exchanges.
I recently bought little bit, The reason you mentioned was why I halved my buying quantity.
By placing an ask/sell order on the exchange BSE/NSE
at a discount on the face-value of the bond
and waiting few minutes/hours until someone buys them.
(Often it can also involve selling few of the bonds one wishes to sell, at a lower-circuit limit on a day,
and then selling the rest of the bonds at an even lower price the next day,
after the lower-circuit-limit drops further.)
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Thatās why people want FDās as collateral.
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Yes liquidity is the biggest problem (other than interest rate risk etc)ā¦ Only way out is to not have too much of oneās Debt portfolio parked in GOI bonds directly and may be go for these type of ETFs as some of these have decent daily volumesā¦
|Security Name|ISIN|
|GILT5YBEES|INF204KC1030|
|SETF10GILT|INF200KA1JT1|
|ICICI5GSEC|INF109KC14A8|
|ICICILIQ|INF109KC1KT9|
|LICNETFGSC|INF767K01MV5|
|LIQUIDBEES|INF732E01037|
|LIQUIDETF|INF740KA1EU7|
|LTGILTBEES|INF204KB1882|
|MOGSEC|INF247L01AK4|
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Looking at the RBIās stance on interest rate at present
Is it right time to invest in gilt funds if yes please suggest some good gilt funds direct schemes.
I am buying them to get cash collateral margin by pledging.
Do you guys think interest rate will come down or go up in next 3 to 6 months?
Also please advice what are advantages/disadvantages between cash component mutual funds vs GOI bonds for cash component. @TradeB2B @cvs @viswaram @Jason_Castelino @Stonecold @Akash_Shah
I feel the interest rates will remain at the existing levels in the next 3 to 6 months. We may even see another last 25 to 50 points increase for one last time.
But that doesnāt mean the value of gilt funds will fall. May be itās already priced in by the market. The fall in bond value or rise doesnāt happened exactly when interest rate changes. The market players have their expectations and trade these bonds accordingly. Only if there is a surprise move by the RBI, there will be sudden increase or decrease of value of bond.
This is just like even bad results from a company can increase the value of stock. May be the market was expecting worse.
Personally I have not checked the YTM of any Gsec. If you do this you will a get rough idea of what market expects.
This would mean you wouldnāt sell them in short duration. Over a period of 5 years I am of the opinion that gilt funds will beat any other debt fund which is considered to be liquid component for pledging.
Go for fund. Gsec and not that liquid plus not tax friendly since interest will be taxable every year.
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Liquidity can be the one reason but not the taxation part because the returns from debt funds have also been included in the tax slab of the investor ?
Nah. It still makes difference. If you go for fund, you have to pay tax only at the time of redemption. There is time value for those funds. You are delaying the tax payment. You will get more collateral margin also.
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fully agree with everything @Jason_Castelino has said.
My views are similar. I think we are near peak of interest cycle, maybe another small hike. But I think elevated rate might continue for some time.
On Bond Vs. Gilt fund, I would prefer a MF, mainly because if taxation as explained by Jason and also because liquidity is much better in fund compared to Gsec. So getting out is relatively easier if needed.
Even the RBI MPC panel have no clue what will be the interest rate trajectory.
If your investment horizon is 3 years the interest payout vs growth will not make a huge difference. But on a 15+ year tenure the difference is huge!
GOI bonds interest yield is max 7.2 to 7.3% now. Money market & liquid funds last year approx 5.6 to 5.8%
To get good benefit from GILT you need to hold 10 years
Also from a personal risk & appetite the preference will change from person to person. Personally I like MM funds - after this LTCG indexation removal that attractiveness has gone !
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Right now, it is quite flat/inverted. Liquid and money market yields were above 7% when i last checked. Not much premium for long term vs short term.
HDFC Money market :
https://www.valueresearchonline.com/funds/16004/hdfc-money-market-fund-direct-plan/
Yield to Maturity (%) info 7.60
Modified Duration (yrs) info 0.70
Expense info 0.21%
HDFC Gilt
https://www.valueresearchonline.com/funds/16046/hdfc-gilt-fund-direct-plan
Yield to Maturity (%) info 7.45
Modified Duration (yrs) info 3.48
Expense info 0.46%
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Just to confirm - are positions gets squared off first and then if there is any debit balance then pledged securities gets sold?;
or pledged securities gets sold without squaring off any running positions?
So can we assume when interest rate go down - gilt funds will have higher value ā¦in that sense this is the right time to get in to Gilt funds. I understand @Jason_Castelino said it does not always correlate immediately ā¦but more likely gilt funds will go value go higher?