Bond market: The Indian bond market has been witnessing increased retail interest of late, largely due to the subdued equity market, monetary easing, and increased geopolitical uncertainties.
As rate cuts become more likely, investors are locking into higher yields before they decline further.
Experts point out that segments like AA and A-rated bonds have gained traction among retail participants as they offer a balanced mix of high yields and reasonable credit quality.
More risk-averse investors prefer AA-rated bonds for stability, while those chasing higher returns are exploring select single-A papers after evaluating issuer fundamentals.
Even long-end government securities (G-Secs) are finding renewed interest among retail investors, given the potential for capital appreciation in a falling rate environment.
Experts highlight that retail investors must keep bonds in their portfolio as they give stable returns, help in capital preservation during times of stock market volatility, diversify one’s portfolio, reduce overall risk, and offer flexibility as well.
“Corporate bonds have seen a massive, nearly 280 per cent YoY growth in demand from retail investors, now clocking ₹2,367 crore worth of transactions in the month of July 2025,” said Nikhil Aggarwal, founder and group CEO, Grip Invest.
“Investors are looking for low-risk, low-volatility, fixed-income investment options that offer enhanced yield. Such risk-reward is being met by investment-grade corporate bonds, and this trend has accelerated in 2025 due to an increase in volatility in the equity markets, combined with RBI rate cuts, leading to a significant reduction in the FD rates offered by banks,” said Aggarwal.
Bond investment explained
Bonds are relatively safer than equities as they give fixed returns. Investing in bonds of a government, corporation, or other entity, gives regular interest payments and the return of the principal at maturity.
A bond yield is the rate of return you earn from a bond based on its current market price. For example, if you buy a ₹1,000 bond with a ₹70 annual interest payment, the bond yield is 7 per cent. But, if the price of that bond has fallen to ₹950 now, your ₹70 interest rate will mean your yield is now 7.37 per cent. This explains why bonds and bond yields move in opposite directions.
Why should bonds be an integral part of one’s portfolio?
Bonds play a crucial role in diversifying an investment portfolio. They act as a counterbalance to equities, providing stability when markets turn volatile.
Vishal Goenka, co-founder of IndiaBonds.com, underscored that for individual investors, bonds bring predictability — fixed interest payouts, defined maturity, and lower correlation with equity market swings.
In India, Goenka said, as retail participation broadens, bonds are increasingly being viewed not just as a conservative option but as an enabler of disciplined wealth creation.
Moreover, with more categories — from government securities to corporate bonds — investors can tailor their portfolios based on risk appetite and financial goals.
Bonds help investors preserve capital, earn steady cash flow, and diversify their investments. They also offer higher returns than traditional FDs.
What should be your bond investment strategy now?
According to experts, the short-term secured bonds have gained popularity among investors amid the rate reduction cycle.
“Short-term bonds expiring within five years accounted for more than half of the new bond-securitised debt issued in May, up from one-third in April,” said Aggarwal.
Goenka said a barbell strategy could work well in the rate cut environment — combining short-term high-yield corporate bonds with long-duration government securities.
“Short-term (2–3 year) high-yield bonds provide superior current income and protection against reinvestment risk, while long-duration G-Secs offer potential capital gains as interest rates fall,” said Goenka.
“This dual approach allows investors to capture yield today and benefit from possible price appreciation tomorrow. Overall, it’s a phase where being proactive, diversified, and duration-aware can help investors optimise returns in a softening rate cycle,” said Goenka.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
