Sebi's Easier Rules Drive Retail Participation In Bond Market

(MENAFN- Live Mint) Retail investor participation in the bond market has risen following the regulator's June 2024 decision to lower the minimum investment threshold, according to market participants.

Around $3 billion annually is coming purely from retail investors in bonds, said Nikhil Aggarwal, founder and group chief executive officer at Grip Invest, a bond platform. The segment is growing by around 300% annually, Aggarwal said at the Mint India Investment Summit held in Mumbai.

The Securities and Exchange Board in India (Sebi ) made access to corporate bonds easier by reducing the minimum investment ticket size from ₹1 lakh to ₹10,000 in June 2024.

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The average bond investment size now is ₹50,000-60,000, according to Aggarwal. Investors transact on Grip's platform at least eight times a year, with half the users now coming from beyond the top 15 cities, he said.

Retail participation in the bond market was less than 2% as of FY22, a trend also seen globally, Niti Ayog said in a December report.

In more developed markets like China, retail participation is supported through exchange-traded bonds, online bond trading platforms, and simplified access points. In the US, retail investors can access bonds more easily through mutual funds, ETFs, and regulated broker-dealer platforms, ensuring greater inclusion, the report said.

Technology to drive bond adoption

Technology will play a big role in bringing bonds and fixed income to more people, allowing them to simulate their portfolios and understand how bonds will feature in them, according to Vineet Malhotra, co-founder and CEO at Compoundexpress.

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In India, mutual fund distributors only sell mutual fund schemes, said Malhotra.“We've got to enable these advisors with more products and make MFDs a private banker to their clients. The point is these products should be accessible to a lot more people.”

Bonds are a small part of retail investors ' portfolios compared to mutual funds. Retail participation could further deepen if wealth managers or mutual fund distributors start offering a bouquet of bonds to their investors.

The wealth of affluent households is expected to surge to $2.3 trillion by FY29, creating substantial opportunities for both established players and new entrants in the sector, according to a January 2025 Deloitte report.

Wealth management in India has largely catered to ultra-high-net-worth and high-net-worth investors, according to Dipak Daga, head of strategy and investor relations at Jio Financial Services.“With technology, the middle and the mass affluent segments have now become serviceable. As the country grows, India cannot sustain 8–10% growth over the next 10–15 years without the entire pyramid seeing income growth.”

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