Now Reading: Rs 10,000 bonds: Don’t rely only on credit ratings
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Rs 10,000 bonds: Don’t rely only on credit ratings
Retail investors are pouring into corporate bonds after minimum investments dropped to Rs 10,000, but many are relying too heavily on credit ratings, Livemint reports. Experts say ratings only assess repayment likelihood…
The Story in Brief
Retail investors are pouring into corporate bonds after minimum investments dropped to Rs 10,000, but many are relying too heavily on credit ratings, Livemint reports. Experts say ratings only assess repayment likelihood and miss default, liquidity, and price risks. A rating should be a starting point, not the final answer.
Investors should check rating history, use the lowest rating if multiple agencies rate the bond, and examine whether the bond is secured. Government bonds are safer than even AAA-rated corporates. Capital gains tax also applies on bonds sold in the secondary market, 12.5% for long-term holdings.
The Indian Opinion
The narrative that a AAA rating equals safety is dangerously simplistic, IL&FS and DHFL were highly rated before they collapsed. Investors must stop treating ratings as guarantees and start reading the rationale, track record, and asset backing. The real test will come when the next downgrade cycle hits: will retail bondholders who chased yield without checking liquidity be able to exit without loss?
Source: livemint.com
This story was synthesised by AI from the source linked above.
