Glossary · 62 terms
Fixed Income
All fixed income terms in the EquitiesIndia.com glossary — plain-English definitions written for Indian retail investors.
54EC Bonds(capital gains bonds)
Section 54EC bonds are specified long-term capital asset bonds issued by NHAI, REC, PFC, and IRFC that allow investors to claim exemption on long-term capital gains from the sale of immovable property by reinvesting the gains in these bonds within six months of the asset transfer, subject to a maximum investment limit of Rs 50 lakh per financial year and a mandatory lock-in period of five years.
Accrued Interest(bond accrued interest)
Accrued interest is the coupon income that has accumulated on a bond since the last coupon payment date, forming the difference between the 'dirty price' (all-in settlement price) and the 'clean price' (price quoted in the market excluding accrued interest).
Bharat Bond ETF(Bharat Bond)
Bharat Bond ETF is India's first corporate bond ETF, launched by Edelweiss AMC in December 2019 under a Government of India mandate, investing exclusively in bonds of Central Public Sector Enterprises (CPSEs), and structured as a target maturity fund with defined maturity dates, listed on NSE and BSE.
Bond Duration(Macaulay Duration)
Bond Duration is a measure of the sensitivity of a bond's price to changes in interest rates, expressed in years. Specifically, Macaulay Duration represents the weighted average time to receive all cash flows from a bond, while Modified Duration quantifies the percentage change in bond price for a 1% change in yield.
Bond ETF (India)(Bharat Bond ETF)
An exchange-traded fund that invests in a portfolio of bonds — typically government securities or high-quality corporate bonds — and trades on stock exchanges like equity ETFs, providing retail and institutional investors with bond market access, intraday liquidity, and transparent pricing.
Bond Valuation (Mark-to-Market)(MTM bond valuation)
The process of valuing bonds at their current fair market value based on prevailing yields rather than amortised cost, as required by Ind AS 109 for financial instruments classified under FVTPL (Fair Value Through Profit or Loss) or FVOCI (Fair Value Through Other Comprehensive Income) categories, resulting in unrealised gains or losses flowing through income or equity respectively.
Call and Put Options in Bonds(callable bond)
Callable bonds give the issuer the right to redeem the bond before maturity at a specified call price, while putable bonds give the investor the right to sell the bond back to the issuer at a predetermined price, with both embedded options altering the bond's duration and yield profile.
Certificate of Deposit(CD)
A Certificate of Deposit (CD) is a negotiable, unsecured, short-term money market instrument issued by scheduled commercial banks and select all-India financial institutions to raise funds from the money market. CDs are issued at a discount to face value and redeemed at par, with maturities ranging from 7 days to 1 year for banks.
Commercial Paper(CP)
Commercial Paper (CP) is a short-term, unsecured money market instrument issued by creditworthy corporates, primary dealers, and all-India financial institutions to raise funds for working capital and short-term financing needs. In India, CP is issued in denominations of Rs 5 lakh and multiples thereof, with maturities ranging from 7 days to 1 year.
Convexity(Bond Convexity)
Convexity is a measure of the curvature of the relationship between a bond's price and its yield, serving as a second-order correction to Modified Duration. A bond with higher convexity gains more in price when yields fall and loses less when yields rise compared to a lower-convexity bond with the same duration — making convexity a desirable property in bond portfolios.
Corporate Bond(Corporate Debt)
A Corporate Bond is a debt security issued by a private or public sector company to raise capital from investors, carrying a stated coupon rate and maturity date. In India, corporate bonds are regulated by SEBI and traded on recognised stock exchanges as well as the RBI's Negotiated Dealing System-Order Matching (NDS-OM) platform.
Corporate Bond Spread Over G-Sec(credit spread)
The difference in yield between a corporate bond and a comparable-maturity government security (G-Sec), representing the credit risk premium demanded by investors for holding a private issuer's debt relative to the sovereign, with spreads widening for lower credit ratings (AAA, AA, A, BBB).
Credit Default Swap (CDS)(CDS)
A Credit Default Swap (CDS) is a bilateral financial derivative contract in which the protection buyer pays a periodic premium to the protection seller in exchange for a payment contingent on the occurrence of a defined credit event — such as default, bankruptcy, or restructuring — of a specified reference entity, allowing market participants to transfer credit risk without transferring the underlying bond.
Credit Rating Agency (India)(CRA India)
Credit rating agencies in India are SEBI-registered entities — primarily CRISIL, ICRA, CARE Ratings, India Ratings and Research, Acuite Ratings, and Brickwork Ratings — that assess and publish the creditworthiness of debt instruments, issuers, and structured obligations, using standardised rating scales that guide investor decision-making in the bond and commercial paper markets.
Credit Spread(Yield Spread)
A Credit Spread is the difference in yield between a corporate bond (or any non-sovereign debt instrument) and a risk-free government security of comparable maturity. It compensates investors for taking on the additional credit, liquidity, and default risk of the non-sovereign issuer relative to the government.
Current Yield vs Yield to Maturity(current yield)
Current yield measures the annual coupon income of a bond as a percentage of its current market price, providing a simple snapshot of income return, while Yield to Maturity (YTM) is the total annualised return assuming the bond is held until maturity and all coupons are reinvested at the same rate, making YTM a more comprehensive measure of total expected return.
Day Count Convention(Act/365)
Day count convention is the rule that specifies how the number of days in an interest accrual period is counted relative to a year, affecting accrued interest, coupon calculations, and derivative valuations across different instrument types and markets.
Debt Mutual Fund Taxation Post-2023(debt fund taxation 2023)
Following the Finance Act 2023, debt mutual funds — defined as those investing less than 65% of their assets in domestic equity — lost their long-term capital gains (LTCG) tax treatment with indexation benefit, and all gains from such funds invested on or after April 1, 2023 are taxed at the investor's applicable income tax slab rate regardless of the holding period, effectively equating their tax treatment with bank fixed deposits.
External Commercial Borrowing (Detailed)(ECB India)
A framework under FEMA through which eligible Indian borrowers — corporates, NBFCs, and infrastructure entities — raise foreign currency debt from international markets, subject to RBI's master directions governing eligible lenders, end-use restrictions, minimum average maturity, and mandatory hedging requirements for certain categories.
Floating Rate Bond(FRB)
A Floating Rate Bond (FRB) is a debt instrument whose coupon resets periodically based on a reference benchmark rate, protecting investors from rising interest rates by ensuring the coupon moves in line with market yields.
Floating Rate Note (FRN)(FRN)
A debt instrument whose coupon resets periodically based on a reference benchmark rate — such as MIBOR (Mumbai Interbank Offered Rate) for corporate FRNs or the NSE 182-day T-bill cutoff for RBI-issued FRNs — providing investors protection against rising interest rates.
Floating Rate Savings Bond (FRSB)(FRSB 2020)
The Floating Rate Savings Bond (FRSB) 2020 (Taxable) is a non-tradeable, non-transferable savings instrument issued by the Government of India through RBI, offering a variable interest rate linked to the NSC (National Savings Certificate) interest rate plus a fixed spread of 0.35%, currently paying 8.05% per annum with semi-annual interest payments.
Gilt Mutual Fund vs Direct G-Sec (RBI Retail Direct)(RBI Retail Direct)
Gilt mutual funds invest primarily in government securities (G-Secs) managed by a professional fund manager, while the RBI Retail Direct scheme (launched November 2021) allows individual investors to purchase government securities directly from the primary market and hold them in their own gilt account — the two routes differ in cost, liquidity, risk management, and tax efficiency.
Government Securities Auction Calendar(G-Sec auction schedule)
The schedule published by RBI at the start of each half-year indicating the planned issuance of dated Government Securities (G-Secs) through the primary auction process, specifying indicative amounts, tenors, and auction dates to enable market participants to plan their portfolios and liquidity.
Green Bond(ESG bond)
A green bond is a fixed-income instrument in which the proceeds are exclusively used to finance or refinance eligible environmental or climate-related projects such as renewable energy, clean transportation, or sustainable water management.
India Bond Index(Indian Bond Index)
India Bond Index refers to domestic and international fixed income indices that benchmark the performance of Indian government and corporate bonds, including indices constructed by the Clearing Corporation of India (CCIL), JSE (Johannesburg Stock Exchange), and Bloomberg, used for FPI inflows and domestic bond fund benchmarking.
Indian Bond Market Overview
India's bond market encompasses government securities (G-Secs), treasury bills, state development loans, corporate bonds, and money market instruments, cleared and settled through CCIL, with RBI managing the sovereign debt market and SEBI overseeing corporate bonds — a market that is gradually opening to retail participation.
Inflation-Indexed Bond(IIB)
An Inflation-Indexed Bond (IIB) is a government security whose principal and/or coupon is adjusted for inflation, ensuring that real returns are preserved regardless of the inflation trajectory.
Inflation-Protected Securities (India)(capital indexed bonds)
Inflation-Protected Securities in the Indian context refer to Capital Indexed Bonds (CIBs) and Inflation Indexed Bonds (IIBs) issued by the Government of India where the principal amount is adjusted for inflation (measured by the Wholesale Price Index or Consumer Price Index), protecting investors from the erosion of real returns caused by rising price levels.
Interest Rate Risk(duration risk)
Interest rate risk is the risk that the market value of a fixed-income instrument will decline when interest rates rise, arising from the inverse relationship between bond prices and yields — a fundamental dynamic that affects bond portfolios, debt mutual funds, and the asset-liability management of financial institutions.
Inverted Yield Curve(Yield Curve Inversion)
An Inverted Yield Curve occurs when short-term bond yields are higher than long-term bond yields, producing a downward-sloping yield curve. It is widely regarded as a precursor to economic slowdown and has historically preceded recessions in developed economies. In the Indian context, temporary yield curve inversions have coincided with phases of aggressive monetary tightening by the RBI.
InvIT (Infrastructure Investment Trust)(Infrastructure Investment Trust)
An Infrastructure Investment Trust (InvIT) is a SEBI-regulated pooled investment vehicle that holds income-generating infrastructure assets such as roads, power transmission lines, gas pipelines, and renewable energy projects, and distributes a majority of its cash flows to unit-holders on a quarterly basis.
JPMorgan GBI-EM India Inclusion(GBI-EM India)
JPMorgan GBI-EM India Inclusion refers to the addition of Indian government bonds to JPMorgan's Government Bond Index – Emerging Markets (GBI-EM) Global Diversified series from June 2024, a landmark event expected to channel tens of billions of dollars of FPI inflows into Indian G-Secs.
Key Rate Duration(KRD)
Key Rate Duration (KRD) measures a bond's or portfolio's price sensitivity to a 100 basis point change in the yield at a specific maturity point along the yield curve — such as the 2-year, 5-year, or 10-year rate — while holding other maturities constant, enabling granular analysis of exposure to non-parallel shifts in the yield curve.
Masala Bond(rupee-denominated bond)
Masala bonds are rupee-denominated bonds issued by Indian entities in overseas capital markets, allowing the issuer to raise foreign capital while the currency risk is borne by the foreign investor rather than the Indian borrower.
Masala Bond (Detailed)(Masala Bond)
An Indian Rupee-denominated bond issued by Indian entities (corporates, financial institutions, or government-related entities) in offshore international capital markets — primarily London and Singapore — where the currency risk is borne by the foreign investor rather than the Indian issuer.
Modified Duration(MD)
Modified Duration is a measure derived from Macaulay Duration that directly quantifies the approximate percentage change in a bond's price for a 1% (100 basis point) change in yield. It is the most widely used metric for interest rate risk management in fixed income portfolios and is the standard duration figure reported by Indian mutual funds in their fact sheets.
Municipal Bond(ULB bond)
A municipal bond is a debt instrument issued by urban local bodies (ULBs) such as municipal corporations to raise long-term capital for urban infrastructure projects, with proceeds typically ring-fenced for specific purposes such as water supply, sewage treatment, or road development.
Nifty AAA Bond Plus SDL Sep 2026 50:50 Index(AAA SDL 2026 Index)
The Nifty AAA Bond Plus SDL Sep 2026 50:50 Index is a target maturity fixed income index that holds an equal-weighted blend of AAA-rated corporate bonds and State Development Loans maturing in or around September 2026, enabling roll-down investing in India.
Non-Convertible Debenture (NCD)(NCD)
A Non-Convertible Debenture (NCD) is a fixed or floating-rate corporate debt instrument that cannot be converted into equity shares of the issuer, traded on Indian stock exchanges after listing, and is subject to mandatory credit rating by a SEBI-registered credit rating agency.
Perpetual Bond (AT1)(AT1 bond)
Additional Tier 1 (AT1) bonds are perpetual, non-cumulative, deeply subordinated instruments issued by banks under Basel III norms that can absorb losses through principal write-down or equity conversion when a bank's Common Equity Tier 1 ratio falls below a pre-specified trigger.
Primary Dealer System(PD)
A framework established by RBI in which licensed financial intermediaries — called Primary Dealers (PDs) — are obligated to bid at G-Sec auctions, underwrite unsubscribed portions, and provide two-way market-making quotes in the secondary market, in exchange for access to RBI's liquidity windows.
Rating Downgrade/Upgrade(credit downgrade)
A rating downgrade occurs when a credit rating agency lowers the credit rating assigned to a debt issuer or instrument, reflecting a deterioration in creditworthiness, while a rating upgrade is the reverse action indicating improved credit quality — both events carry significant consequences for bond prices, borrowing costs, and equity market sentiment.
RBI Floating Rate Bond 2028(RBI floating rate bond)
The RBI Floating Rate Savings Bond 2020 (Taxable) is a sovereign-guaranteed retail savings instrument issued by the Government of India through RBI, offering an interest rate linked to the prevailing National Savings Certificate (NSC) rate plus a spread of 35 basis points, with a 7-year tenor and a floating rate reset every six months, currently offering 8.05% per annum (as of recent resets).
RBI Retail Direct(RBI Retail Direct Gilt account)
RBI Retail Direct is an online platform launched by the Reserve Bank of India in November 2021 that allows individual retail investors to open a Retail Direct Gilt (RDG) account directly with RBI and invest in Government Securities, Treasury Bills, State Development Loans, and Sovereign Gold Bonds without requiring a broker or mutual fund intermediary.
Reinvestment Risk(reinvestment rate risk)
Reinvestment risk is the risk that periodic interest income or principal repayments received from a fixed-income instrument will be reinvested at a lower interest rate than the original investment, reducing the total realised return below the yield-to-maturity assumed at the time of purchase.
Repo Market(repurchase agreement)
The repo market in India is a short-term money market where participants borrow funds by selling securities with a simultaneous agreement to repurchase them at a specified future date and price, enabling liquidity management by banks, mutual funds, primary dealers, and the RBI.
Rupee Denominated Bond vs Foreign Currency Bond(INR bond vs USD bond)
A comparative framework for Indian issuers choosing between issuing Rupee-denominated bonds (where currency risk sits with investors) versus Foreign Currency bonds (USD, EUR, or JPY-denominated ECBs, where the Indian issuer bears the exchange rate exposure), analysed across dimensions of cost, hedging, investor base, and liability management.
Secured vs Unsecured Bonds(secured debenture)
Secured bonds are backed by a charge over specific assets of the issuer, giving bondholders a defined priority claim on those assets in insolvency, while unsecured bonds (debentures) rely solely on the issuer's general creditworthiness with no specific collateral protection.
Sovereign Gold Bond(SGB)
Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold and issued by the Reserve Bank of India on behalf of the Government of India. They offer investors an alternative to holding physical gold, providing a fixed annual interest rate on the invested amount plus potential capital appreciation linked to gold prices.
Sovereign Yield Curve Construction(G-Sec yield curve)
The process of deriving a continuous zero-coupon or par yield curve from observed Indian G-Sec market prices, using methodologies such as Nelson-Siegel or cubic spline fitting, with CCIL and NSE publishing reference sovereign yield curves used for valuation and risk management.
Spread Duration(credit spread duration)
Spread duration measures the sensitivity of a bond's price or a portfolio's value to a one basis point change in the credit spread (the yield premium demanded by investors above the risk-free rate) rather than to changes in the absolute level of risk-free yields, providing a tool for assessing credit spread risk independently of interest rate risk.
State Development Loan (SDL)(SDLs)
State Development Loans (SDLs) are dated securities issued by individual state governments of India to fund their fiscal deficits, auctioned through the RBI and carrying a modest yield spread over central government securities of equivalent tenor.
STRIPS (Separate Trading of Registered Interest and Principal)(zero coupon government bonds)
STRIPS (Separate Trading of Registered Interest and Principal of Securities) are zero-coupon securities created by separating the individual coupon payments and the principal repayment of a government bond into standalone tradeable instruments, each maturing on specific dates, allowing investors to construct precise cash flow matching strategies and creating a term structure of zero-coupon rates from government bonds.
Target Maturity Bond Fund (Roll-Down Strategy)(TMF)
A passively managed open-ended debt mutual fund that holds a portfolio of bonds maturing around a defined future date and follows a roll-down approach — the portfolio's duration naturally decreases as the maturity date approaches — offering investors a near-predictable return if held to maturity with minimal reinvestment risk.
Tax-Free Bonds (Detailed)(tax-exempt bonds India)
Tax-free bonds are long-tenure debt instruments issued by specified Indian public sector undertakings — including NHAI, IRFC, PFC, REC, HUDCO, NTPC, and others — where the interest income received by investors is completely exempt from income tax under Section 10(15)(iv)(h) of the Income Tax Act, 1961, making their effective post-tax yield substantially higher than comparable taxable instruments for investors in higher tax brackets.
Tri-Party Repo (TREPS)(TREPS)
Tri-Party Repo (TREPS) is a collateralised borrowing and lending mechanism in India's money market where the Clearing Corporation of India Limited (CCIL) acts as the tri-party agent, managing collateral allocation, valuation, substitution, and settlement on behalf of borrowing and lending participants.
When Issued (WI) Market(WI market)
A pre-auction segment in the Indian G-Sec market where participants trade a notified but yet-to-be-issued security on a conditional basis — transactions settle only after the security is actually issued in the auction — enabling price discovery before the auction and allowing PDs to hedge their underwriting risks.
Yield Curve(G-Sec Yield Curve)
The Yield Curve is a graphical representation plotting the yields (interest rates) of bonds of the same credit quality across different maturities, from short-term to long-term. In India, the government securities yield curve — plotting RBI-issued G-Sec yields from 91-day T-Bills to 40-year bonds — is the benchmark reference for all fixed income pricing.
Yield Spread Analysis(credit spread)
Yield spread analysis involves measuring the difference in yield between a corporate or quasi-sovereign bond and a comparable-maturity Government of India (G-Sec) benchmark, with the spread representing the additional risk premium demanded by investors for taking on credit, liquidity, or sector-specific risks beyond the risk-free rate.
Yield to Call(YTC)
Yield to Call (YTC) is the annualised rate of return an investor earns on a callable bond if the issuer exercises the call option on a specified call date before the bond's final maturity, calculated by discounting all expected cash flows (coupons plus the call price) up to the call date to equal the bond's current market price.
Zero Coupon Bond(ZCB)
A zero coupon bond is a debt instrument that pays no periodic interest; instead it is issued at a deep discount to its face value and redeemed at par at maturity, with the difference representing the investor's return.