The debt market in India consists of mainly two categories — the government securities or the G-Sec markets comprising central government and state government securities, and the corporate bond market.
The government securities are issued by the Reserve Bank of India (RBI) on behalf of the Government of India in order to finance the fiscal deficit.
Government securities have always been considered as an investment option which is suitable only for banks, financial institutions and corporate. However, these securities are one of the best options for investment for common investors as well. Follwing are its advantages:
1) Risk free: Government securities have always been an ideal example of risk free security. Thus, for investors looking for risk free investment, government securities are best option.
2) Good long term returns: These returns are as good as the bank deposits; however unlike bank deposits these deposits are available for longer duration.
3) Good liquidity: Government securities can be bought and sold like equity products on NDS-OM (Negotiated Dealing System- Order Matching) platform of CCIL. The liquidity in these securities is good as banks and financial institutions regularly participate in this market.
4) Diversifies your portfolio: With the addition of government securities funds in your investment portfolio it gets well diversified and the risk mitigates because government securities are considered as risk free.