Trading and Pricing of NCD Bonds Listed on NSE India

Non-Convertible Debentures (NCDs) offer an appealing investment opportunity in the Indian debt market, particularly for those seeking steady returns. They are accessible to large institutions and individual investors and provide more favorable interest rates than traditional savings accounts. Notably, NCDs are listed on the National Stock Exchange (NSE), facilitating convenient transactions due to the market’s transparency and liquidity.

The valuation of NCDs depends on several factors, including interest rates, the issuing company’s credit rating, and market demand. As NCDs are not convertible into shares, their worth depends on the issuer’s capacity to fulfill its debt obligations. The pivotal role played by the NSE in enhancing the traceability of NCDs contributes to the advancement of India’s corporate bond market, offering a dependable platform for investors and corporations.

Now that the fundamentals have been discussed, let’s examine how NCD bonds are priced and traded on NSE India. You’ll gain better insight into how these bonds function in the market and the factors influencing their value.

Bonds of NCD Listed on NSE India

Companies issue Non-Convertible Debt instruments (NCDs) to raise funds from the public. Unlike convertible debentures, NCDs cannot be converted into equity shares, so investors are assured of receiving the principal repayment and interest upon maturity. These bonds of NCD listed on NSE are popular with investors seeking steady returns, offering higher interest rates than traditional fixed deposits or government bonds. In addition to repaying the principal at maturity, the issuing company pays interest regularly, typically quarterly, semi-annually, or annually.

The Indian corporate bond market has grown significantly, and NCDs have contributed to its development. Improved liquidity and easy trading via the National Stock Exchange (NSE) have increased retail investor participation, improving the importance of NCDs within the Indian economy. Bonds of NCD listed on NSE are categorized into two main types: secured and unsecured. Another distinction lies between fixed-rate and floating-rate NCDs. The following offers a quick comparison of the different kinds of NCDs:

Features	Secured NCDs	Unsecured NCDs	Fixed-Rate NCDs	Floating-Rate NCDs
Risk	Lower risk as they are backed by company assets	Higher risk, not backed by assets	Stable, as the interest rate remains fixed	Fluctuates based on market conditions
Interest Rate	Generally lower due to reduced risk	Higher to compensate for greater risk	Fixed rate for the entire term	Adjusts based on market benchmarks like RBI repo rate
Repayment Security	Assets serve as collateral, ensuring repayment	No collateral; repayment depends on issuer’s ability	Predictable returns with fixed interest	Returns vary with market interest rates
Investor Profile	Suitable for risk-averse investors	For investors willing to take on more risk	Suitable for conservative investors	For investors comfortable with variable returns
Tenure	Longer tenure, typically 5-10 years	Shorter to medium tenure	Often tied to longer-term investments	Suitable for medium-term investments
Return Predictability	Predictable due to security backing	Less predictable due to higher risk	Provides stable and predictable income	Income may fluctuate with the market
Market Sensitivity	Not very sensitive to market changes	Sensitive to issuer’s performance and market conditions	Not sensitive to market rate changes	Highly sensitive to changes in market rates
Best For	Investors seeking safety and moderate returns	Investors looking for higher returns at higher risk	Those wanting consistent long-term income	Investors aiming to benefit from potential rising rates

This flexibility allows investors to choose NCDs based on their investment horizon, risk tolerance, and income needs.

Also Read: How to Invest in Bonds in India: Best Bonds & Simple Steps

After studying the NCD bonds listed on the NSE, let’s examine the various platforms that promote the trading of NCD bonds, making it easier for investors to buy and sell these instruments.

Platforms for Trading Bonds NCD Listed on NSE

NCDs have gained prominence, and various platforms now promote their trading and pricing, offering investors multiple avenues to manage their investments efficiently.

Traditional Broker Platforms

Traditional broker platforms have long been a staple for trading NCDs in India. These platforms involve working with registered stockbrokers or financial advisors who smooth out the buying and selling of NCDs on behalf of their clients. Investors can access NCDs through brokers with the necessary infrastructure to execute trades on the NSE. Examples include prominent brokers like Zerodha, HDFC Securities, and ICICI Direct.

These brokers offer personalized advice and help drive the complexities of trading bonds of NCD listed on NSE, including the terms of different debentures and evaluating their credit risk. However, selling through traditional brokers may involve higher transaction costs and commissions, impacting overall returns.

Online Bond Investment Platforms

With the rise of digital finance, online bond investment platforms have become increasingly popular among investors looking to trade bonds of NCD listed on NSE. These platforms, such as PayTM Money, GripInvest, and Wint offer a more streamlined and cost-effective way to access NCDs than traditional brokers. Investors can use online platforms to view real-time prices, execute trades, and manage their NCD investments from anywhere.

These platforms often provide detailed information on various bonds of NCD listen on NSE, including credit ratings, interest rates, and maturity periods. The convenience of online platforms is complemented by lower transaction fees, making them an attractive option for many investors seeking efficiency and cost savings.

Also Read: NBFC Bonds: An In-Depth Guide to Non-Banking Financial Company Bonds

Dedicated NCD Investment Platforms

Dedicated NCD investment platforms are specialized services that focus exclusively on Non-Convertible Debentures. Notable platforms include GoldenPi, India Bonds, and The Fixed Income. These platforms are designed to cater to investors specifically interested in NCDs, offering a range of features tailored to this asset class. 

They provide comprehensive tools for evaluating NCDs, such as detailed credit analyses, historical performance data, and portfolio management features. Some dedicated platforms offer research reports and expert recommendations to help investors make informed decisions.

By focusing solely on NCDs, these platforms aim to deliver an enhanced trading experience with in-depth knowledge and resources specific to the needs of NCD investors.

Overcome challenges with Tap Invest’s high-return, alternative fixed-income investments customized for you, and earn 13.5-14.5% annualized returns in just 30-90 days by Invoice Discounting. Learn more about our other investments by following Tap Invest on Instagram.

Now that we’ve discussed bonds of NCD listed on NSE trading plans, let’s look at the difficulties NCDs might encounter in this industry. Learning these obstacles can help you cruise NCD trading more skillfully.

Challenges in Trading NCDs

Various obstacles to trading bonds of NCD listed on NSE India affect pricing and accessibility. Here are the main issues:

Restricted Access on Popular Brokerage Sites

NCDs are often not listed on popular brokerage platforms or have limited options. This restriction hampers investors’ ability to quickly buy or sell NCDs, potentially leading to reduced liquidity and difficulties executing trades at desired prices. Investors may need to rely on specialized platforms or directly contact brokers to obtain NCDs.

Challenges with Direct Trading on BSE and NSE Websites

Direct trading options on the NSE and Bombay Stock Exchange (BSE) websites can be cumbersome compared to stocks or mutual funds. Problems such as complex navigation, delayed order execution, and inadequate support can hinder efficient trading, leading to missed opportunities or less favorable trading conditions.

Also Read: How State-Guaranteed Bonds Offer Safety and Steady Returns for Investors?

Need for Specialized Platforms

There is a growing demand for specialized platforms that offer better service and yield for NCDs to address these issues. Platforms such as GoldenPi, India Bonds, The Fixed Income provide customized services such as yield calculations, in-depth performance data, and advanced trading tools. Specialized platforms focused on NCDs offer features like detailed market analysis and tailored recommendations, which general brokerage platforms may need more.

Improving accessibility, user experience, and the availability of specialized services is crucial for making NCD trading more effective and investor-friendly.

There are methods available for trading bonds of NCD listed on NSE India. Here’s a guide to navigating the trading process effectively.

Methods to Trade NCDs listed on NSE India

There are multiple approaches to trading bonds of NCD listed on NSE India, each with its advantages. Here are the main methods:

Trading Through Conventional Brokers

NCDs can be traded through established brokerage platforms like Zerodha. Investors can search for available NCDs and place orders directly through the trading interfaces provided by these brokers. While traditional brokers offer robust infrastructure and customer support, their knowledge of NCDs may be limited, which could impact decision-making.

Using Bond Houses

Bond houses such as GoldenPi, The Fixed Income, and India Bonds focus on trading fixed-income securities, including NCDs. These platforms provide comprehensive data, analysis, yield computations, and tailored investment advice. They often offer access to a broader range of NCDs than traditional brokers.

Also Read: NTPC Bonds: A Low-Risk Investment for Conservative Investors

Employing Digital Investment Platforms

Digital platforms like PayTM Money, GripInvest, and Wint are increasingly popular for trading NCDs. These platforms offer user-friendly interfaces, automated investing tools, real-time market data, and mobile app accessibility. They appeal to investors seeking technological convenience and integrated investment management solutions.

Investors can trade bonds of NCD listed on NSE India through conventional brokers, specialized bond houses, or advanced digital platforms. Each method provides varying levels of convenience and service, so it’s important to choose the one that best aligns with your needs and financial goals.

Get higher returns with Tap Invest‘s alternative fixed-income products—explore opportunities in Invoice Discounting, Asset Leasing, Unlisted Bonds, and P2P Investments today. Watch Tap Invest’s YouTube videos to learn how to invest in different options.

Let’s get into the key factors that determine the pricing and yield of bonds of NCD listed on NSE and how they influence investment decisions.

Pricing and Yield of NCDs Listed on NSE India

Interest rates, credit ratings, market dynamics, and economic conditions influence the pricing and yield of bonds of NCD listed on NSE India. Here’s a detailed look at the key factors influencing NCD pricing and yield:

Factors Affecting the Pricing of NCDs

Several factors influence the pricing of NCDs, including:

Interest Rates

The prevailing interest rate environment significantly impacts NCD pricing. When market interest rates rise, the prices of existing NCDs typically fall as new issues offer higher returns. Conversely, if interest rates decline, existing NCDs with higher rates become more valuable.

Credit Rating

The credit rating of the issuing entity affects NCD pricing. Higher-rated NCDs (AAA or equivalent) generally trade at a premium due to their lower risk. In contrast, lower-rated NCDs (BBB or below) might offer higher yields to compensate for the increased risk, leading to lower prices.

Market Demand and Supply

The supply and demand for NCDs can also influence pricing. High demand for a particular NCD can increase its price, while an oversupply can lower it.

Economic Conditions

Broader economic conditions, including inflation rates and economic growth, impact investor confidence and the pricing of NCDs. Adverse economic conditions may lead to higher yields and lower prices for NCDs.

Yield to Maturity (YTM) and Its Impact

Yield to Maturity (YTM) is a key measure used to assess the attractiveness of NCDs. YTM represents the total return an investor can expect if the NCD is held until maturity, considering the annual interest payments and any difference between the purchase price and the face value.

Calculation of YTM

YTM is calculated based on the bond’s current market price, face value, coupon payments, and the time remaining until maturity. It reflects the annualized return, assuming the bond is held to maturity and all coupon payments are reinvested at the same rate.

Also Read: Zero-Coupon Bonds Explained: How They Work and Their Benefits

Impact on Investment Decisions

YTM helps investors compare NCDs with other investment options. A higher YTM indicates a higher potential return but may also signal higher risk. Investors use YTM to gauge whether an NCD offers competitive returns compared to alternative fixed-income securities or investment opportunities.

Negotiating Yields with Issuers for Better Investment Returns

Negotiating yields with issuers can enhance investment returns, especially for institutional investors or high-net-worth individuals. Here’s how investors can approach this:

Direct Negotiations

Investors with significant capital or those investing in large volumes of NCDs may negotiate directly with issuers to secure better yields. Issuers may be willing to offer improved terms to attract large investors or meet their funding requirements.

Market Conditions

Timing negotiations during favorable market conditions, such as periods of high capital demand or market corrections, can provide leverage for better yields.

Leveraging Relationships

Building relationships with financial institutions or bond houses can expedite better negotiation outcomes. These intermediaries may offer insights or access to preferential rates based on their market position and expertise.

YTM provides a comprehensive measure of potential returns, and negotiating yields with issuers can further enhance investment returns. These aspects help investors make well-informed decisions in the NCD market.

With a clear picture of bonds of NCD listed on NSE pricing and yield dynamics, it’s time to focus on practical tips and strategies for successful NCD trading. These strategies can help investors steer the complexities of the NCD market and maximize their returns.

Tips and Strategies for Successful NCD Trading

Bonds of NCD listed on NSE India are traded, and successful trading requires strategies that reduce risk and maximize returns. The following are essential pointers and tactics to consider:

Assessing Credit Ratings and Associated Risks

The issuing company’s credit rating is one of the most crucial factors when trading NCDs. Ratings assigned by organizations like CRISIL, ICRA, or CARE reflect the issuer’s financial stability and creditworthiness.

Higher Ratings (AAA or AA)

These ratings indicate excellent financial standing and low default risk. Although NCDs with high ratings are generally safer, they may offer lower yields.

Lower Ratings (BBB or below)

NCDs with lower ratings carry higher risk but offer higher yields to compensate for the risk. These are riskier options for conservative investors due to their greater susceptibility to adverse market conditions.

Assessing credit ratings helps investors balance risk and return, as choosing issuers with lower ratings could result in losses if the issuer defaults on payments.

Using High-Yield NCDs to Diversify a Portfolio

NCDs can substantially boost a portfolio’s yield potential and are vital to any investor’s strategy.

High-Yield NCDs

These are financial instruments with higher interest rates, often issued by companies in riskier industries or with mid-range credit ratings.

Balancing with Low-Risk Assets

By including high-yield NCDs in a diversified portfolio, investors can enhance overall returns while managing risk. Combining these NCDs with safer, lower-yield bonds or fixed deposits allows investors to spread risk across various assets. This approach ensures that safer assets act as a cushion, even if high-yield NCDs underperform.

Careful selection based on credit ratings and industry performance ensures better portfolio performance while managing downside risks.

Also Read: IRFC Bonds Explained: Capital Gain, 54EC, and Tax-Free Bonds

Experience-Based Tips for Novice NCD Traders

To help novice NCD traders steer the complexities of bond trading, here is some practical advice:

Start Small

Novice investors should begin with a small position in NCDs to familiarize themselves with market dynamics without taking on too much risk. As confidence grows, they can gradually increase their exposure.

Monitor Interest Rate Changes

NCD prices are affected by interest rate fluctuations. Rising interest rates can negatively impact bond prices, so novice traders should monitor central bank policies and market expectations regarding interest rates.

Consider Long-Term Investment Horizons

NCDs perform best when held to maturity, offering fixed returns and regular coupon payments. To maximize the income generated by these instruments, traders should aim for more extended time horizons.

Check Liquidity

Novice traders should be aware of the liquidity of the NCDs they invest in. Thinly traded bonds of NCD listed on NSE can be harder to sell without incurring losses. Selecting bonds with higher trading volumes or from well-known issuers can help avoid liquidity issues.

Tax Implications

It’s essential to understand how interest income and capital gains from NCDs are taxed. It ensures compliance with tax laws and helps evaluate post-tax returns.

Investors can improve their success in trading bonds of NCD listed on NSE India by selecting suitable high-yield securities and following practical trading advice.

As a leading fintech company, Tap Invest specializes in alternative fixed-income investments that offer higher potential returns than traditional options. From short-term gains through Invoice Discounting and P2P Investments to more substantial returns with Asset Leasing and Unlisted Bonds, explore investments ranging from 10% to 18%. Invest with Tap Invest today.

With a solid perception of tips and strategies for successful bonds of NCD listed on NSE, it’s helpful to address common queries that investors often have. Below are some frequently asked questions to provide further clarity on trading NCDs.

Frequently Asked Questions (FAQs)

An investor’s questions regarding platforms, procedures, and preferences are frequently addressed when trading bonds of NCD listed on NSE India. Here are some frequently asked questions:

1. What are the typical issues with Trading NCDs on Platforms Like Groww?

Users may find it more difficult to access a wide selection of bonds of NCD listed on NSE on platforms like Groww, as they often have limited listings. Low trading volumes of NCDs can also result in liquidity issues, and bond investors frequently need more adequate tools for assessing yields and risks.

2. What are the Steps for Trading NCDs on Different Platforms?

To trade NCDs on sites like Zerodha or PayTM Money, login, look up NCDs by name or ISIN, examine the details (coupon rate, maturity, credit rating), and submit a buy order. Specialized platforms like GoldenPi offer enhanced tools for assessing yields and risks.

3. Why Specialized Platforms Are Preferred Over Traditional Brokerages?

More appropriate for bond investors than traditional brokerages, specialized platforms such as India Bonds and GoldenPi focus on fixed-income securities, offer better options for NCD liquidity, and offer tools for assessing yields and risks.

Also Read: Detailed Guide on PFC Bonds: Capital Gain Bonds, Interest Rates, and More

Conclusion

When trading bonds of NCD listed on NSE India, it’s important to know how prices are set, calculate yields, and use different trading strategies. Factors like interest rates, credit ratings, and market conditions can affect NCD prices, but looking at the yield to maturity (YTM) helps you see what you might earn over time.

You can trade NCDs through digital platforms, specialized bond houses, or traditional brokers. Each type of service offers different features and levels of support. Platforms like Groww might have fewer NCD options and less helpful tools, while specialized platforms provide better liquidity and more detailed support.

To make intelligent choices, check credit ratings to assess risk and pick high-yield NCDs to spread out your investments. Start with small amounts and keep an eye on interest rates to reduce risks and boost your returns. Thus, you can improve your NCD trading results and make better investment decisions.For exceptional growth potential, begin by exploring Tap Invest‘s specialized financial products. Find out how to improve your portfolio with our high-return investment options. Visit Tap Invest and check out our unique offerings.