The onset of the second wave of Covid has put long-term debt investors in India in a Trishanku-like situation (Trishanku was a king in Hindu
POWERGRID Infrastructure Investment Trust (PGInvIT) is the third InvIT and the second in the power transmission space (the other being IndiGrid InvIT) to be listed in the Indian stock markets. It is sponsored by listed PSU Power Grid Corporation of India (PGCIL and henceforth called the Sponsor).
Please find an explanation of what an InviT is here. This article will give you only our quick take on the offer and whether it is suitable for you. It is not a deep dive into the InvIT’s business and financials.
IndiaGrid Invit is making a Rs 1,000 crore public issue of secured redeemable Non-Convertible Debentures (NCDs) from April 28 2021 to April 30 2021 to
Suddenly everyone’s talking about US bond yields surging. I see that the 10-year US government security is up by some 0.02 % to 1.57%. Why is this such a big deal?
While yesterday’s move isn’t big, what’s big is the US 10-year Treasury’s 43 basis point rise in the last one month. This means that, a month ago, investors in long term bonds issued by the US government were getting 1.13% by way of interest and now they’re getting 1.57%. That’s a 40% jump in returns from an asset that is regarded as one of the safest parking grounds for money in the world.
With the economy looking up and interest rates likely to rise again, safety-seeking investors may like
to shop around for bank deposits offering attractive rates. But as we had explained in an earlier
article, given the way deposit insurance works in India, it simply isn’t worth it to take risks with your
bank deposits for slightly higher rates. (Read this to know why https://www.primeinvestor.in/why-bank-
fixed-deposits-can-be-high-risk-too/)
But identifying a sound bank has become infinitely tougher post-Covid. Borrowers are just coming
out of a loan moratorium and banks are prevented from reporting their true bad loan picture due to
a Supreme Court standstill. If bad loan provisions get out of hand, some currently profitable banks
can turn loss-making or face capital shortfalls.
With bank deposit rates plumbing the depths, fixed income investors are hard-pressed to find investment options that can deliver better returns without big risks. Power Finance Corporation’s (PFC) retail offer of secured non-convertible debentures (NCDs) appears well-timed to capitalise on this need. But should you bite the bait? If yes, which of the 7 bond options is worth a look? An analysis.
Forecasting is a tricky business and 2020 showed how Black Swans flying at you out of nowhere can make you look foolish. But looking back at the debt outlook and strategy we recommended a year ago, we’re glad we erred on the side of caution.
If you decide to park a portion of your deposit portfolio in riskier bank fixed deposit options after fully calculating the risks that can play out, that’s certainly a valid decision. But before you take that call, it is important to know how bank failures actually play out in India.
Covid or no Covid, stock markets in the last six months have been quite kind to equity investors. But debt investors have had no such luck. Even though India’s Monetary Policy Committee (MPC) has been in pause mode since June after slashing its repo rate from 5.4% to 4% in the preceding eight months, the returns that savers get on their bank and corporate FDs, bonds and debt funds have continued to plumb new depths.
The Monetary Policy Committee (MPC) in its latest meeting has sent out mixed signals about the future direction of interest rates. Citing an uncertain inflation outlook, it called a pause to its repo rate cuts, holding the rate at 4 per cent. At the same time, it also promised to continue its ‘accommodative stance’ due to unprecedented Covid stress on the economy.
The NFO of the latest tranche of the Bharat Bond ETF – a portfolio of high-quality PSU bonds from the Edelweiss AMC – will be open from July 14-17, 2020.
If the recent events in the debt space brought to light the liquidity risk arising from lower rated papers, you probably haven’t seen the unfolding of various kinds of risk since September 2018. In 2013, when duration became a risk on the back of rate hikes, money flowed copiously to credit risk over the next 5 years. Now, the cycle has turned. Money is moving to duration from credit risk.
Hold On
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