Debt Market Investment
At the current economic
scenario debt investment would be one of the best options. Bonds and fixed
deposits have safety element and gives reasonable returns. Tax free corporate bonds
are returning around 13% return. It is the main reason that investor are back
to these tax free bonds.
At present Rural
Electrification Corp. Ltd (REC Ltd) is available for investors. It offer 8.26% annualized
yield to retail investors for 10 year maturity period. It has raised more than Rs
4300 crore in the past two weeks. Investors are grabbing this opportunity as
they know that this high yield may not sustain in this high level.
Many bank fixed deposits
offer 8.5-9 percent-at least in the short term. Bonds are even better. For
example, NHAI tax-free bonds can be bought from the market for around Rs 1,084
(10-year bonds, maturing in 2022), giving a yield to maturity of 8.1-8.2
percent. Adjusted for the top tax bracket, this gives nearly 12 percent annual
yield, well above inflation. Tax-free bonds are issued only by government-owned
companies, and to that extent they are also safe from defaults.
According to finance
ministry sources, India will allow to international funds to invest in tax free
bonds with attractive return. The high subscription of these types of bonds would
give a new boost to our economy as these investments are long term investments.
The government can use this fund to develop the infrastructure, new power
plants, road etc. and as a result investor’s confidence would come back for
India.
State companies bonds
with tax free interest consider best combination of returns and safety. In the
present highly volatile market, tax free bonds are offering possibly highest
returns to investors. According to me, it is
very good opportunity to 30% tax bracket investors as the return in these bonds
are total tax free and reasonable for 10 year tenure.
For more detail about any other query related investment,
you can contact me through my email.
Warm regards,
Arvind Trivedi, Certified Financial
Planner
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