Mumbai, May 28: Gilts donít dazzle. Not for retail investors, who are yet to take a fancy for government securities.
Months after the government launched its much-vaunted drive to get more individuals to buy sovereign debt, there are few who appear to have the taste and the tenacity to invest in these instruments. Better options, like assets that fetch more attractive returns and an incipient stock rally, have kept retail investors away.
Market watchers say the retail debt market (RDM) of National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), where ordinary folks can buy gilts, have reported volumes so poor that the plan looks still-born.
Starting from 154 trades and a turnover of Rs 1.41 crore when the scheme kicked off on January 13, deals on NSE have dwindled to single digits over the past month.
On May 27, for instance, only one transaction for 200 securities valued at a measly Rs 24,000 was reported.
There were also days in this month when the segment did not record even a single deal; for most sessions, the number of transactions hovered between one and seven, with the value crossing Rs 3.38 lakh on one occasion.
Experts trot out several reasons why retail investors have not warmed up to gilts in the way the government expected. Lack of awareness in the public and instruments that return more money are key factors.
According to a senior bond market analyst with a large private sector bank, the investor has a variety of options, including small-savings instruments like Kisan Vikas Patras, post-office deposits and National Savings Certificates; even some bank fixed deposits offer more.
There is also a question of availability. Investors would rather trudge to post-offices or public sector banks than make an arduous journey to the stock market, the only place where gilts are peddled off the shelf.
Yet another reason for government securities not finding favour with investors is the poor rate of return, particularly in the current environment where yields on the benchmark 10-year security have slid below 6 per cent. Against this, there are other instruments, including bank deposits, which appear more appealing.
Also, there is an element of risk associated with government securities, whose prices move either way in the market. Retail investors are not equipped with skills to gauge the pitfalls that go with these securities, an analyst said. In such an event, they finding it prudent to park their money in mutual funds that invest in the debt market.
Till the finance minister launched the scheme in January, insurers, banks, firms and provident funds were key players.