Investing in Indian corporate debt
The latest opportunity for contrarians / bond traders / value investors, via Economic Times: Foreign funds buy Indian corp bonds trading at a discount
In some of the papers, yields on the securities have crossed 50%, which is an indication that the market is beginning to price in a possible default risk on these investments. The bonds are quoting at yields of 27-60% against 12-16% a year ago.
Consider the Moser Baer bond. A fund manager investing $100 in a 3-year bond of Moser Baer expiring in March 2011 can see the investment grow to $160. Says Shivkumar, fund manager, Church Investments based out of Singapore, “We do not expect Indian companies to go under. So, if we are getting these kinds of returns, as these bonds are trading at a good discount to their issue price, why not capture the opportunity.”
As retail players, what are our choices for participating in this market?
- NSE Retail Debt Market (RDM) - This is dead. There are literally zero trades on any given day.
- Debt funds - There are tons of debt funds managed by various AMCs, you can research them here. The key issue here is that you have to comb through them to find one that matches your trading hypothesis. For example, trying to find a bond mutual fund that invests only (only!) in Indian government securities is like trying to find a needle in a haystack.
And of course, we don’t have exchange-traded credit derivatives.
Here are the online data resources for the debt markets I know of (do suggest more):
- India Bond Watch (yield curve hasn’t been updated since March!)
- Debt On Net (most of the content is behind a pay-wall)
- NSE (RDM is d-o-a, and WDM daily turnover is only ~ 1000 cr)
Bottom-line: Direct access to our corporate bond markets is pretty much non-existent for retail traders. The lack of affordable access to historical data on yields, default rates, etc. does not help either. Hopefully, the next few years will see much more regulatory efforts in this direction.
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