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India's Corporate Bond Market: Growth and Future Trends



  Dec 05, 2023

India's Corporate Bond Market



What is a Corporate Bond Market?

The corporate bond market is a financial platform where companies issue bonds to raise funds from investors. These bonds are debt securities, promising to pay back the principal along with interest at a specified future date.

Importance of the Corporate Bond Market:

Capital Raising: Enables corporations to gather capital for expansion, projects, or refinancing existing debt.

Investment Opportunities: Provides investors, including institutions and individuals, with investment options, offering potential returns and diversification.

Economic Growth: Fuels economic growth by supporting corporate projects and infrastructure development.

Projected Growth by 2030:

According to Crisil, India's corporate bond market is expected to more than double, reaching over Rs.100 lakh crore by March 2030.

Growth drivers include increased capital expenditure, the infrastructure sector's appeal, and the financialisation of savings.

Recent Trends and Future Outlook:

Past Growth: In the last five years till March 2023, the market grew 9% annually to Rs.43 lakh crore.

Capex and Economic Outlook: High capacity utilization and strong corporate balance sheets are expected to drive growth in capital expenditure.

Financing Role: The corporate bond market is anticipated to finance a significant portion of the estimated capital expenditure.

Credit Risk Improvements: The credit risk profile for infrastructure assets is strengthening, enhancing recovery prospects and long-term lending capabilities.

Regulatory Interventions: Crisil notes that regulatory changes will further aid market growth.

Enhancing the Market:

Crisil suggests that relaxing investment restrictions on lower-rated corporate bonds and strengthening the credit default swaps market will support the industry's expansion.

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