Zerodha chief Nithin Kamath on Monday said the market regulator’s proposal to reduce the corporate bonds’ face value can lead to greater retail participation.
Sebi in a consultation paper floated the idea of permitting issuers to launch NCDs (non-convertible debentures) or NCRPS (non-convertible redeemable preference shares) with the face value of Rs 10,000.
The move is aimed at enhancing the participation of non-institutional investors in the corporate bond market.
According to the Sebi paper, the issuer should appoint a merchant banker who would carry out due diligence for issuance of such privately placed NCDs and NCRPS and disclosure requirements in the private placement memorandum.
In October last year, the regulator reduced the face value of corporate bonds to Rs 1 lakh from Rs 10 lakh.
Kamath, who regularly tweets on all things markets, said for investing to go beyond the top 5-10% of the country, equities may not be the right instruments because of the volatility.
“A bad market phase or losses when they start will end with investors permanently leaving the markets,” he said.
The right products, according to the Zerodha boss, are government bonds and relatively safe corporate bonds from quality issuers like PSUs and AAA-rated entities.
“These are good instruments for them to accumulate some savings and then invest in equity mutual funds and direct equities,” he added.
Corporate bond market has clocked a compound annual growth rate (CAGR) of 9% over the past five years. According to Crisil Ratings, the momentum is likely to continue and the outstanding size of the market is expected to more than double from around Rs 43 lakh crore as of last fiscal to Rs 100-120 lakh crore by FY30.
“Hopefully, companies think of small investors as potential investors. If holding a company’s stock can help improve brand awareness, maybe having bonds can also do that?,” Kamath said.
(Subscribe to ETMarkets WhatsApp channel)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
