Bonds: The last financial bastion for individual investors to conquer

A burgeoning young population, characterized by an insatiable thirst for consumerism and an equally satisfying surge in disposable income, combines synergistically with an ever-expanding appetite for digitalization. This convergence forms the essential recipe for an economy poised to leap to unprecedented growth and prosperity. The Indian economy is on the cusp of explosive growth. It is rated as the fastest-growing economy over the next decade and is expected to become the third-largest economy by 2030. Financial awareness has become a widely discussed topic in recent times due to advancements in technology, rising standards of living, rapid growth in disposable income and rising interest in general.

The main drivers of financial investments in India generally revolve around a few key asset classes: stocks, real estate, gold, and bonds. Among these four, stocks and FDs (a proxy for fixed income) were the investment options in the financial markets. Historically, term deposits (FDs) have long been a preferred option for risk-averse investors seeking stability. For example, as of March 2023, fixed deposits in India totaled $1.35 trillion, with individuals and Hindu Undivided Families (HUFs) accounting for 47.35% of the total, according to RBI data.

However, despite the huge amounts deposited in fixed deposits, retail participation in other fixed products is relatively low. As on January 31, 2024, out of 3,50,60,904 active customers registered under NSDL, only 2.19% have accounts related to debt instruments. This pales in comparison to the stock market, which boasted a market capitalization of $4.45 trillion on December 29, 2023, according to data from BSE. The data is shown in the graph below.

(The author is co-founder of IndiaBonds.com)