Most Indian investors think fixed income means FDs. The actual government securities market is far more sophisticated, more tax-efficient, and now directly accessible to retail investors through RBI Retail Direct.
TK
Tanmay Kurtkoti
Founder & CEO, RupeeCase · QC Alpha
⏱ 14 min read⟳ Updated 6 May 2026◆ Intermediate
Fixed income is the unglamorous half of a portfolio that most equity-focused retail investors ignore. That's a mistake. Understanding how bonds work | what drives their returns, their risks, and how they behave in different macro regimes | is essential for building a complete systematic multi-asset strategy.
India's fixed income market is one of the largest in the world by outstanding debt, but retail participation has historically been low due to access barriers. That's changing rapidly with RBI Retail Direct and the Bharat Bond ETF. This module covers everything you need to know.
7.15%
10Y G-Sec yield Apr 2026
209L
Crore outstanding G-Sec market
10000
Rupees min lot RBI Retail Direct
20%
Debt LTCG flat rate post July 2024
India now has the second deepest G-Sec market in Asia. Retail access was the bottleneck for 20 years. RBI Retail Direct fixed that in 2021. It is the most under-used investment platform in the country.
1
Pick horizon
Match bond tenor to your actual cash need date
2
Credit rating filter
AAA sovereign or AAA PSU only for core sleeve
3
Yield to maturity
Compare YTM across bonds of similar tenor and rating
4
Duration check
Know your interest rate sensitivity before buying
5
Hold to maturity
For retail, HTM is almost always better than trading
My bond buying checklist. Step 4 is where most retail loses. A 10 year G-Sec has roughly 7 year duration, meaning a 1% yield jump is a 7% mark to market loss. Most SIPs in long dated debt funds do not appreciate that.
Indian fixed income market by segment
G-Sec sovereign 58%
State dev loan 24%
Corporate AAA 12%
Below AAA 6%
G-Sec holder mix
Banks 38%
Insurance 28%
Mutual funds & PF 20%
RBI & others 14%
The Indian bond market is still institution heavy. Retail holds under 2%. As RBI Retail Direct matures this will look very different by 2030.
Indian debt category returns FY2024-25 (pre tax)
Liquid funds
6.8%
Short duration AAA
7.4%
G-Sec 10Y held to mat
7.2%
Gilt funds long dur
8.9%
Credit risk funds
9.6%
Credit risk funds look like the winners on the table. They are not. FY2024-25 was benign. In 2018 to 2019 credit funds lost 10 to 15% when DHFL and IL&FS blew up. Extra yield without extra risk does not exist in Indian debt.
From my notebook
In 2019 a family office client insisted on a credit risk fund at 10.4% yield because the bank FD was 6.8%. I pushed back, walked through the IL&FS default that had just hit. They moved anyway. Eight months later their capital was down 14% on a side pocketed credit fund. Since then my debt rule for every client: core sleeve is G-Sec or AAA PSU only. Credit adventure is capped at 10% of debt portfolio, never more. The extra 2% yield on paper is rarely worth the 20% capital event when it goes wrong. In Indian fixed income, dullness is a feature.
Types of fixed income instruments in India
Government Securities (G-Secs)
Bonds issued by the central government. Zero credit risk | the Government of India cannot default in rupee terms. Available in maturities from 91 days (T-bills) to 40 years. Coupon paid semi-annually. Traded on NSE and BSE. Now available directly to retail investors through RBI Retail Direct.
State Development Loans (SDLs)
Bonds issued by state governments (Maharashtra, Karnataka, etc.). Slightly higher yield than G-Secs (30 to 80 bps spread) to compensate for marginally higher credit risk. Also zero practical default risk given RBI's oversight. Available in maturities up to 20 years. Included in Bharat Bond ETF.
Corporate Bonds
Bonds issued by companies | PSUs (HDFC, REC, NTPC, PFC) and private sector. Credit risk varies from AAA to speculative grade. Higher yield than G-Secs. Tax treatment as debt: gains taxed as income post April 2023 amendment. Accessible via debt mutual funds, bond platforms (RBI Retail Direct doesn't cover corporate bonds).
Sovereign Gold Bonds (SGBs)
Government bonds denominated in grams of gold. 2.5% annual interest (taxable). Capital gains on maturity (8 years) are tax-exempt. Trade on NSE/BSE but with low liquidity. Combines gold exposure with sovereign credit. RBI issues new tranches periodically.
Yield-to-maturity | the single most important bond metric
The yield-to-maturity (YTM) is the annualised return you will earn if you buy a bond today and hold it to maturity, assuming all coupons are reinvested at the same rate. It's the bond equivalent of CAGR.
Two critical relationships every fixed income investor must know:
Yield and price move in opposite directions. If the 10-year G-Sec yield rises from 7% to 7.5%, the price of that bond falls. This is mathematically precise | not an opinion.
Longer maturity = higher sensitivity to yield changes. A 1% rise in yield causes a ~1% fall in a 1-year bond's price, but a ~10% fall in a 10-year bond's price. This sensitivity is called duration.
Duration risk for Indian investors: The Bharat Bond ETF 2032 has a duration of ~7 years. If RBI raises rates by 1%, this ETF falls approximately 7% in price. This is not a loss if you hold to maturity | you'll still earn the YTM at purchase. But if you need to sell before maturity, you face mark-to-market losses. For systematic multi-asset strategies, use short-duration debt (1 to 3 years) for capital preservation and long-duration debt (10+ years) only when deliberately taking duration bets.
RBI Retail Direct | the game changer for retail investors
RBI launched the Retail Direct platform in 2021, allowing individual investors to open a gilt account directly with RBI and participate in government securities auctions | buying G-Secs and T-bills directly without a broker or mutual fund intermediary.
No brokerage, no distributor commission, no fund management fees
RupeeCase's Allcap Multi Asset strategy uses a trend-following signal to allocate between Nifty 500 equity, Bharat Bond ETFs (short and long duration), and gold. When the equity signal weakens (bear regime), the strategy shifts allocation toward short-duration debt as a defensive position. The G-Sec yield curve is monitored as a macro input. The debt allocation logic uses the 10-year G-Sec yield as a key regime indicator. Available at invest.rupeecase.com.
Glossary
Key terms | Module 6.7
G-Sec
Government Security | bond issued by the Government of India. Zero credit risk. Available in maturities from 91 days to 40 years. Now accessible via RBI Retail Direct.
Yield-to-maturity
The annualised return if a bond is held to maturity and all coupons reinvested at the same rate. The primary metric to compare bonds. Price and yield move inversely.
Duration
A bond's sensitivity to interest rate changes. A bond with duration 7 falls ~7% in price when yields rise 1%. Longer maturity = higher duration = higher interest rate risk.
RBI Retail Direct
RBI's platform allowing individual investors to buy G-Secs and SGBs directly without intermediaries. Zero fee. Minimum ₹10,000. Launched 2021.
SDL
State Development Loan | bonds issued by state governments. Slightly higher yield than G-Secs due to marginally higher credit risk. Included in Bharat Bond ETF universe.
TK
A note from the author
Why this matters
Fixed income in India is undergoing a quiet revolution | from RBI Retail Direct to the inclusion of Indian government bonds in global indices. Yet most investors still park money in FDs without understanding duration risk, credit spreads, or the yield curve. A well-constructed bond allocation can dramatically improve your portfolio's risk-adjusted returns, and this module shows you how.
Want to put this into practice? RupeeCase is the systematic investing terminal built around everything you're learning here, factor scores, strategy backtests, portfolio construction for Indian markets.
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Just completed Module 6.7 of Tanmay Kurtkoti's free investing course on RupeeCase. Learning about Bonds and Fixed Income in India. Completely free at rupeecase.com/learn