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SAPM CH02

The document outlines various types of bonds, including government, corporate, and green bonds, along with their characteristics. It discusses the components of the debt market in India, advantages of bonds, important factors for bond valuation, SEBI guidelines for investor protection, and strategies for portfolio revision. Additionally, it highlights constraints in portfolio revision and the need for adjustments based on changing investor goals and market conditions.

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atharvakhedekar909
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2 views2 pages

SAPM CH02

The document outlines various types of bonds, including government, corporate, and green bonds, along with their characteristics. It discusses the components of the debt market in India, advantages of bonds, important factors for bond valuation, SEBI guidelines for investor protection, and strategies for portfolio revision. Additionally, it highlights constraints in portfolio revision and the need for adjustments based on changing investor goals and market conditions.

Uploaded by

atharvakhedekar909
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Types of Bonds

Government Bonds – Issued by governments (G-Secs).

Corporate Bonds – Issued by companies.

Convertible Bonds – Convert into equity shares.

Fixed Rate Bonds – Constant interest payments.

Floating Rate Bonds – Interest changes with market rates.

Perpetual Bonds – No maturity, pay interest forever.

Green Bonds – Fund environmental projects.

Components of Debt Market in India

Government Securities – T-Bills, Govt. Bonds (RBI)

Corporate Debt – Debentures, Corporate Bonds, CP (SEBI)

Money Market – Short-term debt (≤1 year): T-Bills, CD, CP, Call Money

Advantages of Bonds

Fixed Income – Regular interest payments.

Lower Risk – Safer than equities.

Capital Preservation – Principal returned at maturity.

Diversification – Reduces overall portfolio risk.

Tax Benefits – Some bonds offer tax exemptions.

Priority in Liquidation – Bondholders are paid first.

Tradability – Can be sold before maturity.

Important Factors of Bond Valuation

FV, MV & RV – Face Value, Market Value, and Redemption Value.

Coupon Rate (Interest) – Annual interest paid on the bond.

Maturity – Time until the bond repays the principal amount.

SEBI Guidelines

Investor Protection – Protect investors' interests.

Disclosure – Ensure transparent information.

Risk Assessment – Invest based on risk profile.

Diversification – Reduce risk by spreading investments.

Regular Review – Review the portfolio periodically.

Registered Intermediaries – Invest through SEBI-registered entities.


Strategies for Portfolio Revision

Rebalancing – Adjust asset allocation to maintain the desired risk level.

Diversification – Spread investments to reduce risk.

Tax Consideration – Plan investments to minimize taxes.

Regular Review – Monitor and update the portfolio periodically.

Constraints in Portfolio Revision

Transaction Costs – Buying and selling expenses.

Tax Implications – Taxes on investment gains.

Liquidity Issues – Difficulty selling investments quickly.

Psychological Biases – Emotions affecting investment decisions.

Need for Portfolio Revision

Change in Investor's Goal – Update as goals change.

Risk Management – Reduce and balance risk.

Market Fluctuation – Adjust to market changes.

Performance Optimization – Improve returns.

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