Module 11   Personal Finance (Part 1)Chapter 15

Investing in Bonds

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15.1 – Context

I understand we concluded the previous chapter by hinting that we would discuss Index funds next. However, I’m taking a bit of a detour to introduce how one can invest in Bonds directly.

Why am ‘I doing this now? Well, that is because we have just discussed debts funds and the associated terms, given the similarity between debt funds and bonds, I thought we could extend that discussion and talk about bonds as well.

Besides, Zerodha’s bond investing platform is up and ready for you to use, so this chapter will help you understand how to use the platform as well.

Remember, when you invest in any sort of debt mutual fund, you primarily invest in a mutual fund whose fund manager invests your funds in various bonds and bills. Using Zerodha’s platform, you can now directly invest in the bonds, just like the fund manager would.

15.2 – The bonds platform

The bonds platform on Zerodha is a part of Coin, our mutual fund platform.

On the landing page, you can see that we are talking about high-quality PSU and Corporate Bonds. High quality here means the highest credit ratings.

At any given point, the platform lists all the available bonds for you to invest. As of today, these are the bonds available to you –

For example, the very first is a bond from Rural Electrification Corporation Limited (REC).

There are two tags below the company’s name; these tags give you vital information on the bonds.

  • PSU Tax-free – Remember, PSUs carry an implicit Sovereign guarantee; hence the credit risk in these PSU bonds is very low. The tax-free bit indicates that the interest income received from these bonds is 100% tax-exempt. The tax-free bit makes these bonds extremely attractive for the investors. However, the tax-free is applicable only for the interest income. If you hold the bond till maturity, there will be no taxation on your interest earnings from this bond. However, if you manage to sell this bond before maturity at a price more than what you had purchased, then you get capital gains which are taxable.
  • Credit Rating – REC Limited’s bond is rated triple-A (AAA) by CRISIL; the rating is an indication of the creditworthiness of the borrower. AAA is the highest-ranking, so one need not worry about the creditworthiness of the borrower, i.e. REC in this case.

Apart from these tags, there are other specs available to you. Some of these are easy and intuitive, while the others are not.

On the platform, you can see a summarized view of the most important parameters for you to consider before investing. A typical investor does not need any more information apart from what’s listed above.

However, for the sake of this chapter and its completeness,  let’s dig into more details of this particular REC bond. The ISIN of this bond is INE020B07HO1, key in the ISIN here and you’ll get all the other information related to this bond.

I’ve highlighted the most significant bits here –

Let’s start with the first item from the left. As we can see, this is a secured debt. A secured debt is a loan backed by security. The classic example is a Gold loan.

In a gold loan, you pledge the gold and raise a loan against it. When you repay the loan, the pledge on gold goes away, and you get back the gold. In case you don’t repay the loan, the lender is free to take your gold and make good for his loss.

Given this, if you look at it from the lender’s perspective, a secured debt gives the lender a higher comfort compared to unsecured debt.

In the next section, you can see that this is senior debt.

Every company has something called ‘Capital Structure’. The capital structure is like a leader board of sorts, which mandates the list of stakeholders who have the highest claim on the company’s repayment and earning structure.

The senior secured debt sits right at the top of a capital structure, while a common stock (equities) sits right at last. Between the senior debt and equity, lie other stakeholders like the unsecured debt, convertible bonds, non-convertible debt etc. In case of liquidation of the company (worst case scenario), the senior debt holders are the first ones to be paid off from the liquidation amount of the company. This significantly enhances the safety of capital for senior debt holders.

So the moment you see secured senior debt, be assured that the credit risk associated is relatively very low.

The section after this is quite self-explanatory, talks about the date of issue. Think about this as the company’s IPO date or an NFO debuting in the MF market.

REC paper was issued in 2013, maturing in 2023, making this a 10-year bond.

Now move your attention to the details mentioned on the right — the topmost section details out a few essential parameters.

Firstly, the face value, which is Rs.1000/-. The face value of a bond is essential for three reasons –

  1. Gives you a sense of the premium or discount the bond is trading to its face value. In the case of REC (refer to the snapshot from COIN), the current price for this bond is Rs.1115.03/-, which is at a premium to face value.
  2. The coupon is paid as a percentage of the face value. The coupon for this bond is 8.01%, which means that every bond you hold gives you Rs.80.01/- as interest income until it matures.
  3. Upon maturity, the redemption value depends on the bond’s face value. More on this later.

The next section highlights the interest payment details. As highlighted, the REC bond pays the interest on 1st Dec every year, till the bond matures. The company pays out interest annually. Some bonds pay interest semiannually, quarterly, and some even pay monthly.

You can also see the maturity date, which is 24th September 2023.

Now that you know these details, I’d suggest you re-look at the COIN snapshot. Everything mentioned in the snapshot should be clear, except for the YTM.

 15.3 – Yield to Maturity

The concept of ‘Yield to Maturity’ or YTM is one of the most important concepts to understand when dealing with bonds. While the bond’s coupon is essential, as an investor in bonds, you need to be more concerned about the YTM than the coupon itself.

I think the concept of YTM is best understood if we look at it from transactions we are familiar with. Given this, let us build a hypothetical situation around this.

Scenario 1

Your friend informs you about a fantastic commercial property, capable of giving you a 20% rental yield on the investment.

Rental yield = Total rent collected in the year / Amount invested in the property.

You get all excited, because, from your research, the average commercial rental yield is about 15%, so the deal your friend proposed stands out. You ask your friend for more information.

He tells that the fair price for the commercial property is 3 Crores. You do not bat an eyelid; you pay 3 Crore cash down and buy the property.

From the next month, you start receiving a rent of Rs.500,000/- into your account.

Twelve months pass by, and rental income is flowing smoothly.

However, at the end of 12 months, you have a premonition that a virus will hit the world, people will start working from home, and therefore the commercial real estate will lose its sheen.

You decide to sell the property and cash out. Assume the property market stayed flat; hence, you get to sell the property at cost, i.e. 3 Crore.

The question is, how much did you make on this entire transaction? In other words, what was your Net Yield? For the sake of simplicity, forget about taxes and charges.

This is a straightforward calculation –

Buy Price = 3 Crore

Sell Price = 3 Crore

P&L on Property = 0 ———- (1)

Rental per month = Rs.500,000/-

Number of months rent collected = 12

Total Rental income = 12 * 500,000 = Rs.60,00,000/- ————– (2)

Net P&L = (1) + (2)

= Rs.60,00,000/-

Net Yield = Net P&L / Buy price

= 60 Lakh / 3 Crore

= 20%

The net yield equals the rental yield.

Scenario 2

Everything remains the same, except that at the time of buying, instead of 3 Crore, you bought the property at 3.3 Crore. What is the net yield?

Buy Price = 3.3 Crore

Sell Price = 3 Crore

P&L on Property = A loss of 30 Lakh ———- (1)

Rental per month = Rs.500,000/-

Number of months rent collected = 12

Total Rental income = 12 * 500,000 = Rs.60,00,000/- ————– (2)

Net P&L = (1) + (2)

= Rs.30,00,000/-

Net Yield = Net P&L / Buy price

= 30 Lakh / 3.3 Crore

= 9.09%

Notice, everything remained the same, except for the buy price. However, this had a big impact on the net yield.

 Scenario 3

Everything remains the same, except that at the time of buying, instead of 3 Crore, you bought the property at 2.9 Crore. What is the net yield?

Buy Price = 2.9 Crore

Sell Price = 3 Crore

P&L on Property = +10 Lakh ———- (1)

Rental per month = Rs.500,000/-

Number of months rent collected = 12

Total Rental income = 12 * 500,000 = Rs.60,00,000/- ————– (2)

Net P&L = (1) + (2)

= Rs.70,00,000/-

Net Yield = Net P&L / Buy price

= 70 Lakh / 3 Crore

= 24.14%

Notice, in all the three scenarios, the rental yield was fixed at 20% that dint change at all. But the net yield changed, based on the transaction prices.

In summary –

  • The rental yield and the net yield matches only when the buy and sell remains the same
  • The net yield is lesser than the rental yield when the buy price is higher than the selling price
  • The net yield is higher than the rental yield when the buy price is lower than the selling price.

The point that I’m trying to make here is that net yield is very different from the rental yield.

Now, let us snap back to the bonds world and make few comparisons –

Buy price of the property = Buy price of the bond

Sell price of the property = Sell price of the bond

Rental yield = Coupon

Net yield = Yield to maturity or YTM.

Look at this again –

The coupon is 8.01%, but the YTM is 5.4%. Why do you think the YTM is lesser than the coupon itself?

Well, that is because you buy this bond at Rs.1115.03/- and upon maturity, this bond is redeemed at Rs.1000/- (scenario 2).

So the effective return you experience here is 5.4%.

15.4 – Accrued Interest

Clicking on the yellow invest button takes you to the next screen on the platform, which gives you a bit more information on the bond.

I suppose you are familiar with most of the information present on this screen, except for the accrued interest bit. The concept of accrued interest is straightforward to understand.

We know the REC bond pays a coupon of 8.01% on Rs.1000/- face value. The Rupee value of the coupon is Rs.80.01/-.

The coupon of Rs.80.01/- gets paid once a year or once in 365 days. We know the date of payment is the 1st December every year.

The last coupon was paid on 1st December 2019, and the next coupon will be paid on 1st December 2020. Between the previous coupon paid and the next coupon date, interest accrues daily.

If you do the math –

Daily accrued interest = Yearly coupon amount / 365

= 80.01/365

= 0.219452 Paisa.

Therefore, by holding this bond, the bondholder earns 0.219452 daily.

Today is 21st May 2020; it is 172 days since the last coupon paid. Therefore, by holding this bond for 172 days, the owner of this bond is entitled to receive –

0.219452 * 172

= Rs.37.745/-

From the screenshot above, you can see that the accrued interest is Rs.37.86/-, which is approximate to what we have calculated.

The settlement price seen is Rs.1115.47/-, which also includes the accrued interest. Therefore, you can break the settlement price into two components –

Settlement Price = Price of the Bond + Accrued Interest

= 1077.609 + 37.8615


So why does the settlement price include the accrued interest?

Well, this is because when you buy the bond, you need to compensate the bond seller the interest he has earned for the duration he has held the bond. Hence, the settlement price includes accrued interest. Also note that when the next coupon is paid by REC, you as the current bondholder will receive the full coupon amount of Rs.80.01/- (thus compensating for the accrued interest that you paid to the seller).

While we are at it, a bit of bond terminology for you.

The settlement price is also called the ‘Dirty Price’ of the bond and the settlement price minus the accrued interest is called the ‘Clean price’ of the bond

15.5 – Should you invest in Bonds?

If you’ve read Varsity by now, you’d probably know me as a one hundred percentage equities guy. I’ve mentioned this in several places with due caution that 100% equity is not perhaps the right approach to build a long term portfolio. I always knew that I have to fix this and start to diversify my little savings. It’s just that I pushed my asset allocation plans further and further.

Well, thanks to COVID, this happened –

A 40% decline in the Index in less than a month. All gains wiped clean. For the first time since I started investing in the markets, I saw that the ten year SIPs go negative as well. I do not think this had happened in the 2008 market crash either. Look at this chart; I’ve got this from Value Research website –

Perhaps this is strong enough reason for me to get started asset diversification. Maybe it is a good idea for you as well if you have not thought of asset allocation yet.

On the asset side, you now have access to –

  • Direct Equities
  • Equity Mutual funds
  • Direct Bonds
  • Debt Mutual funds
  • Sovereign Gold bonds
  • Fixed Deposits from your bank

I think with these assets; you can build any combination of the portfolio with different asset allocation patterns to achieve any portfolio goal.

In the coming chapters, I will discuss portfolio compositions and how you can set up portfolios to match your goals, but before we do that, we will next discuss the Index fund.

Stay tuned.

Key takeaways from this chapter

  • In a tax-free bond, the coupons are tax-free
  • PSU debt carries an implicit sovereign guarantee, and hence very low credit risk
  • The coupon is paid as a percentage of the face value
  • YTM of a bond is the effective yield the bondholder experiences
  • The bond buyer pays accrued interest to the bond seller


  1. Tharun says:

    Hi Sir,

    1) The bond feature is not available in my Coin app. Is it rolled out to everyone? From a Zerodha support ticket, it’s mentioned that it’s in internal testing state.

    2) Can you also explain another set of categories in Bank bonds which are Tier 1 & Tier 2 bonds as per BASEL iii norms which will be more helpful to the readers. Also a Tier 2 bond can be a Subordinate/Senior bond and a Tier 1 bond can be a Senior bond. So if you could post the hierarchy for all those combinations, it will be more helpful.

    3) Can you also please explain about NCD, Convertibles, Preferential shares? And will those also be listed in Coin app?

    Appreciate your work on sharing your knowledge about investments to everyone.


    • Karthik Rangappa says:

      1) It is still an internal beta, will be out soon
      2) Will probably add more chapters related to bonds soon, will cover more topics.

  2. AMANDEEP says:

    Hi sr,
    You know , apart from your financial aspects ,I have Learnt ,one prominent quality from You ie patience …almost Daily I check varsity for new chapters, Sorry to say but it was Very irritating initially, that there was a big time span between two chapters ,because it a human tenancy that we want everything fast and large ,you know more the merrier . ……..But later I realised quality takes time and you never compromise with that and now it makes me excited when I daily check varsity and wait for new chapter and new chapter is like diwali for me……….so sir from bottom of my heart I want to say ,you are an angel for financial knowledge seekers, I can understand your efforts and hardwork behind varsity and hope soon I’ll celebrate Diwali……hats off to you sr……

    • Karthik Rangappa says:

      Thanks for all the kind words 🙂
      Yeah, generating content takes time, at least for me. But I’ll try to speed up the process 🙂

  3. Rohit Dua says:

    Hi Karthik,

    1) When a bond is issued, are YTM and Coupon rate same?

    2) Why would one buy a bond at a premium when a bond at face or discounted value would have a better YTM? Also, do you not think 5.4% return is a li’l too less as a fixed deposit gives a better return?

    3) Is the Clean price (in REC case 1077.609) the premium price of the bond?

    • Karthik Rangappa says:

      1) Yup, thats right. As long as you hold to maturity
      2) PSU bonds, which are tax-free are always sold at a premium, thanks to the implicit sovereign guarantee
      3) Clean price, in this case, is still at a premium to the FV

  4. Divyam Shah says:

    1)They say ytm is like u reinvest the interest of the bond back into a similar bond,so it factors in wether payment is annual or semiannual also?

    2)pls include ETF in future chapters and also explain more about bond purchasing and types of bond with advantage, disadvantage.Looking forward to newer chapters on personal finance

    • Karthik Rangappa says:

      1) Yes, the frequency matters. Yeah, if you open a book on Fixed income, that is the typical definition you’ll find
      2) Yup, will do that. Next up in Index funds 🙂

  5. Bhuvan says:

    Hi Sir,

    Thank you for all your (behind the scenes) efforts in creating these chapters so easy to understand for everyone.

    Reading this chapter has led to an unusual doubt in my mind – when an investor purchase bond, he gets interest from it, but when he buys mutual fund (which holds that bond), the mutual fund get that interest which in turns increases the NAV of the mutual fund. Hope this understanding is correct?

    In one of the AMCs debt fund portfolio, I saw them mentioning both annual return (8.04%) and YTM (5.70%), so why are they mentioning YTM when they are an open-ended scheme? Are they right in showing that? If yes, what does it then implies?

    So will we be expecting a return of 8.04% or 5.70%?

    • Karthik Rangappa says:

      Yes, that is right.
      YTM represents the current yield. In the coming few chapters, I will discuss more on MF parameters and how to read them.

  6. Sekhar says:

    Unable to see bonds section in coin. Only mutual funds are visible

  7. Chandra Babu says:

    Hi Mr. Karthik
    I hope you are doing good and safe.
    I would like to share my journey so far with Zerodha
    I have opened Zerodha Demat account in April 2nd week. After that i had a plan to enroll in face book page course on stocks. I thought to have give a try on Zerodha Varsity and read 1st Module on Introduction. I am working in healthcare profession back ground of education is science and Maths. I have completed reading all the modules till Personal Finance. I will be starting to work on Practical aspects of Fundamental Analysis, Technical Analysis and Quantitative Analysis. My finance knowledge is completely improved.
    I would like to appreciate your efforts providing analogy or example before every concept that appeals to us very simple and that’s great job from your end. Normal distribution and Standard deviation was learnt in school now seems useful. Personal Finance gives complete roadmap to anyone how to plan for Future and Finance.
    Once again a great work and thank you ver much.
    I would like to know how to connect if any clarification require in future like is it by comments section or via mail.

    • Karthik Rangappa says:

      Firstly, heartfelt gratitude to every healthcare professional. You guys are a saving grace to humanity!
      So compared to what you all are doing, the efforts taken to put this content pales. Nevertheless, I hope you continue to enjoy reading the contents here 🙂

  8. Easwar says:

    Thank you Karthik for the chapter on Bonds. I am relatively new to Zerodha and trying to get into Options Trading. I find the material in Varsity to be too good, though I am yet to cover few more modules. Kudos to you and your team! Now my question on Bonds is – As per the illustration on REC bond, there is a premium (on the face value after accounting for the accrued interest) to be paid when we buy from the market. Q1. So, ideally bond has to be held until maturity to achieve YTM return. Is my understanding right? Q2. If one is looking for easy liquidity (say, within an year or so), then such bonds may not be the right one as the effective return would further go down from YTM, is my understanding correct?

  9. Vanipriya says:

    At present is it possible to buy PSU Bank bonds (Teir II debt instruments) through coin?

  10. kumar shivam says:

    Amazing modules karthik bhai, teaching my whole family via varsity.
    Waiting eagerly for index funds and portfolio sections

  11. Skanda Adiga S says:

    Hello sir,
    I am a great fan of your work. When will be this module available for download??

  12. rajiv says:

    Hi Sir, Thank you. My 3 queries. Please clarify. Thank you.

    Q1: So if I purchase the REC Bond (shown in ur above example) on 21st May and hold on till maturity. What would be my returns. My understanding is 4 more payments of interest. So 4 * 80.01 = 320.04. I pay the seller Rs. 37.86 and the Bond is bought at 1077.609 and not F.V of 1000. So that will be a loss of 77.609. So my net returns = 320.04 – 37.86 – 77.609 = 204.571 would be my returns by 24-Sep-2023 for an Investment of 1077.609. Is this correct?

    Q2: Who is the seller? When I buy on May 21st – am i not getting it from REC Directly ? So if it is another user like me then will he have a cap to sell the bond only at 1115.47 or can he sell at his own price (like we do for equity shares).

    Q3: What will REC do with this money collected? Will they use it for their own purpose or they lend it to someone? trying to understand the “Secured” nature here. Because as a lender the Bond buyer is not getting anything for security. So please clarify.

    Thank you,

    • Karthik Rangappa says:

      1) Yes, thats correct
      2) In this case the seller is Zerodha. The price is capped
      3) They use it for various projects. The secured part is that the bond will be secured by an asset.

  13. Nitin Bansal says:

    Hi Karthik,

    There is no proper way to compare mutual funds in Zerodha. Coin must be updated for:
    1. Compare Multiple Mutual Funds returns with respective indexes. Because, not everyone s interested in Equity only 🙂
    2. Mutual Funds Portfolio overlap.
    3. Beta of portfolio, SD, variance etc. whatever you taught in Risk chapter.
    4. It is not easy to find/calculate above points for MFs.


  14. Nitin Bansal says:

    Hi Karthik,

    If i bond in secondary market is YTM 5%, Coupon 8%, FaceValue 1000.
    Then even if i purchase and hold the bond till maturity, My effective interest will be 5% only not 8%.


  15. Nikhil Mungale says:

    Hello Sir,

    This is really good explanation. Learnt lots of basics about market from versity articles.

    I have couple of questions.

    1. The bond maturity is say 40 months in case of REC. After 40 months, will bond gets redeemed automatically ? or as investor I can decide when to sell ( preferably once price appreciates ) ??

    2. Also, if maturity of bond is till 2023 and now its 2020. Considering 40 months validity, bond will get expired on Dec 2023 ( roughly ). But its expiry is mentioned as Sept 23rd 2023. So will bond will get redeem on Sept 23rd 2023 or it will remain valid till Dec 2023?


    • Karthik Rangappa says:

      1) After the tenure, the bond will no longer continue to exist.
      2) It will expire on Sept 23rd 2023.

  16. Darshan Kapadia says:

    Couple of rectifications in the above write up –

    1 – In scenario 2
    Net Yield = Net P&L / Buy price

    = 30 Lakh / 3 Crore (This should be 3.3 Crore)

    = 9.09%

    2 – Interest calculation for this bond should be –

    Face Value * Coupon rate / 366

    This gives per day interest as 0.218852459016393 paisa.

    This 1 day interest * 173 = Rs. 37.8615 interest which matches with snapshot.

  17. Tapashi says:

    If I buy a bond today @ some lumpsum price ,and the bond will get expires on 40 months.
    Tomorrow, If I buy the same bond for the same duration, will it add up the money to existing bond ? or it will create a new bond entry in my profile ?

    Like Mutual funds, we can top up the funds anytime , is it possible in Bonds ?

  18. Shashikanth Pai says:

    SInce Zerodha claims the investment in such bonds are safer, does it provide an option to pledge the same for margin?

  19. Nayana Shah says:

    How do I use coin to invest in bond/fd ipo/new issuance. The above chapter is only for investing through secondary markets, corret?

  20. Harsh Doshi says:

    Where can I get complete list of Taxable Bonds/ NCDs for Retail Investors in Zerodha platform?

  21. Pritam says:

    Can you please share the working of YTM calculation for YTM mentioned on the window?

  22. rajiv says:

    Hi Sir, Is Zerodha selling the Bonds that was purchased by them some time back? in other words is Zerodha selling the bonds they currently own now ?

  23. Mathew says:

    Thanks for another great article. Had some questions.

    I read from the comments that the seller of bonds listed in coin is zerodha itself.
    1) So the price mentioned is Coin is an amount decided by Zerodha itself. Or are there any other external factors?
    2) If I want to sell a bond I purchased before maturity, how can I do that?

  24. Pradeep says:

    If bond is purchased at 1100 and get redeemed at face value 1000. Say redeemed after one year will the difference of 100 be accounted as capital loss. And whether such loss can be set up again capital gain against equity.

    • Karthik Rangappa says:

      Yes, that will be a capital gain loss. I’m not sure if this can be set off against Equity gains, need to check with a CA about this.

  25. Shashank says:

    One word – Excellent explanation of the concept!
    But since now all the bonds are at higher premium to face value it is not prudent to invest in bonds for the mentioned 4 listings.
    Going forward is there any chance to keep new listings immediately once announced?

    • Karthik Rangappa says:

      The platform is evolving, more additions will be done soon. As far as the investment goes, it depends on your risk/reward expectations 🙂

  26. Shashank says:

    Read from above comments, i.e. it is difficult to get the bonds at face value due to sovereign nature? So the current YTM of 4.5 % is still considered as good?

  27. Arvind Rao says:

    Great article Karthik and keep the informative content coming!

    I believe the bonds can also be purchased directly on the NSE via Kite. The one in the example (REC/8.01/Sep-23) is RECLTD-N5 on Kite.

    This particular feature on Coin is for purchasing the bond from Zerodha (likely acting as a dealer or market maker, having secured the bond from another dealer).

    Now the bonds are illiquid, at least on the NSE, so one may or may not get a better price than Zerodha’s offer.

    Apart from the buy price, is there any difference in brokerage or transaction charges in buying via these 2 channels?

    • Karthik Rangappa says:

      Illiquidity is the biggest issue. On any given day all the bonds on NSE put together trade only about 1-2 crores. Charges wise, no brokerage for delivery but statutory charges will be applicable. On exchange, the biggest cost is also the impact cost.

  28. Anil says:

    Hi Karthik, Thanks for this wonderful chapter. As far as I could understand, the bonds pay intrest every year. Which means it is simple intrest and the investment is not compounded over the years. So would it be better to invest in a bond fund? Because when you choose a growth plan the interest earned is also reinvested, making it compounded. Please correct me if I am wrong

    • Karthik Rangappa says:

      Anil, very hard to compare these two. It is like direct stock versus equity MF. Both these are different and have their own risk-reward parameters.

  29. Shriram Karthik K says:

    Greetings Karthik,
    Thanks for providing such a crisp and clear fundamental understanding of the concept.
    Need some more info on the following aspects:
    a) For arriving at the YTM yield, there needs to be a maturity value which needs to be considered, for the YTM yield mentioned for 4 tax free bonds being provided on the platform, what has been considered as maturity value ?
    b) The YTM of the bonds made available on the platform is even lower than the coupon rate and thus even lower than the prevailing Fixed Deposits Rates ?

    • Karthik Rangappa says:

      1) The last date upto which the bond will exist
      2) You cannot compared YTM with coupon rate, as suggested in this chapter, they both are different

  30. Shrihari says:

    Hello, i m intrested in smallcase investment and coin app by zerodha …and frankly speaking i m not having any knowledge about this.Please suggest or guide me.

    Thank You.

  31. RAHUL says:

    வணக்கம் Sir,

    How is the current corporate bonds shown in Coin better than Bank FD? Even after deducting Taxes (10% to 15%) on the Bank FD returns – they are better than the corporate bonds currently in COIN. But Zerodha advertises that corporate bonds returns much better than FD? Can you please help us understand how.


  32. Ramanan says:

    Hi Karthik,
    When the new Bonds will be issues?

  33. Mohit K says:

    Hi Karthik,
    Nicely explained. But Pls clarify one thing.
    Let’s take the example of Housing & Urban Development Corporation Ltd bond.
    YTM=4.44%, FV=1000, C=8.10% Maturity= 1.75 Yrs

    Using excel to calculate PV we get PV(0.0444,1.75,81,1000)= Rs. 1060.35

    Can You pls clarify why Market Price of bond is higher than P.V? If this be the case then the bond is Overvalued and it should not be purchased. I would be happy if you throw some light on reasons for the difference between these prices.


    • Karthik Rangappa says:

      You need to add the accrued interest bit to this right? Even after adding the accrued interest, if the price is higher than yes, it is overvalued.

  34. Chetan SM says:

    Dear Sir,

    Suppose if we want to exit our investment in the PSU & Corporate Bond before it’s Maturity date , will we be levied with penalty.

    If Opportunity is there to exit the Bond in half way , what is the procedure to do it.

  35. m. kumar says:

    Hi Karthik,

    Quick question w.r.t. to the Zerodha platform. continuing with the example; INE020B07HO1 can be bought from the Kite (similar to how we buy equities) or through Coin’s new option to buy PSU bonds.

    What is the difference between both the methods ?

    Also, how can I view the ISIN (as was shown in the article).

    • Karthik Rangappa says:

      These can be bought via Kite, not Coin, Kumar. Look for the scrip like how you would look for any stock from the market watch.

  36. Vivek says:

    I tried to buy the tax-free bond on coin but why there is a maximum limit set each bond is 150Max.
    Where I can buy more than that

    Vivek Chauhan

  37. RAHUL says:

    Looks like you missed my earlier query sir. re-posting it below for your kind reply. Thx.

    வணக்கம் Sir,

    How is the current corporate bonds shown in Coin better than Bank FD? Even after deducting Taxes (10% to 15%) on the Bank FD returns – they are better than the corporate bonds currently in COIN. But Zerodha advertises that corporate bonds returns much better than FD? Can you please help us understand how.


    • Karthik Rangappa says:

      Tax-free makes sense for the 30% guys. For the lower tax bracket guys, taxable bonds make sense. We’ll have some quality AAA-rated taxable bonds which yield higher than bank FDs.

  38. Usha says:


    If, I buy REC bond and want to sell it before the maturity is there a way to sell or have to wait until the maturity. These bonds are not listed long back, why zerodha selling it now.

  39. arun says:

    whether the latest 7.15% floating interest rate bond is fixed interest rate or they change the interest in upcoming years.
    Because they mentioning Floating rate like as NSC.

  40. Harsavardhan J says:

    Hello Sir,

    Please confirm whether my calculation for YTM is right in excel. Did this –> (80.1/365)*298 to arrive at the coupon value of 65.4 for the year 2023..

    21-05-2020 -1115
    01-12-2020 80.1
    01-12-2021 80.1
    01-12-2022 80.1
    24-09-2023 1065.4

  41. Harsavardhan J says:

    Hello Sir,

    Why YTM is considered very important? I mean if I’m going to pay 1115 to get 80.1/year as interest till bond maturity, all I should be concerned is (80.1/1115) –> 7.1% (this no. right) and compare it with other bonds and make my decision on where to invest…

    What am I missing here?

    • Karthik Rangappa says:

      This makes sense if all bonds were bought at par, but since you either buy at a premium or discount to par, the YTM becomes more important than the coupon itself.

  42. Prakasan says:

    Is the interest earned every year in REC or NHAL is taxable ?. Here it is said nontaxable. but while searching in google, mentioning it is taxable. Which is correct ?.

  43. Sri Durga says:

    Hello Sir,

    1). I still didn’t understood why YTM is main role on this? My simple question is that if I purchase REC bond today at 1153.27 price, based on 8.01% interest shall i get 1153.27+92.37=1245.6 after 1 year or not???
    2). I would like to hold this for next 10 years, is the interest will add to principle for compounding??
    3). Is interest will pay off on yearly or half yearly basis. How this works.
    Can you clarify these doubts as i want to invest in REC bond for long term.

    • Karthik Rangappa says:

      1) No, you will get 8.01% on the Face value which is 1000. Upon maturity, you will get face value i.e. 1000 and not 1153. Hence YTM is important
      2) No, interest will be given to you to your bank account
      3) Depends, in this case it will be paid yearly once.

  44. Anu says:


    Wanted to check couple of things, I would like to invest in REC Govt. Bonds (For claiming LTCG benefits), have couple of questions,

    1. Can I invest on Tax free bonds from Zerodha?
    2. Is there any account opening fee for the same?
    3. Do I need to submit any kind of physical documents for opening account?
    4. Is there any commission for purchasing/selling the bonds from Zerodha platform?
    5. I am also confused on coupon rates, if you can help me here it will be grateful.
    6. Can I break this bonds in less than 5 years, if yes what will be procedure. Also, will it be automatically come to linked bank account after 5 years OR i need to do some kind of paper work for the same?


    • Karthik Rangappa says:

      1) Yes, you can.
      2) No, as long as you have a Zerodha trading/demat account
      3) No
      4) Yes, but its baked into the offer price
      5) What is the confusion?
      6) Yes you can break. You will have to try selling this in the secondary market

  45. Vinay says:

    Karthik, Why the COIN requires place ,modify and cancel order permission

  46. Anu says:

    1. How can we break Tax free bonds (Which I claim for tax exemption for LTCG benefit) before lock-in period of 5 years? Is it possible to break them even through any trading platform?
    2. Can you highlight commission model of zerodha fro Govt Bonds (Tax Free) e.g: REC/NHAI?
    3. Can you share your sales email/number who can help me opening zerodha trading account ?

    • Karthik Rangappa says:

      1) Yes, you can by placing a sell order in the secondary market. Not very liquid though
      2) We will be sharing a note on this shortly.
      3) I’d suggest you click – here and follow the on-screen instructions, its fairly straightforward process

  47. Solai says:

    Seeing only 3 bonds listed in the trading platform. How about the other bonds which have been listed in BSE/NSE. How to check their prices ?

    • Karthik Rangappa says:

      Will be adding more bonds for shortly. Look for these bonds in the market watch, just like you would look for a stock.

  48. Nihal Shetye says:

    Dear Karthik,

    Will you adding some more chapters in this module?

  49. sambhav jain says:

    how will i able to sell the bonds before maturity.

  50. vineet agrawal says:

    Excellent Insights on bonds basic .
    What about floating rate savings bonds 2020 , is it available to buy on Coin?

  51. Prakash says:

    Dear Sir
    Is the Bond investment here in Coin connected with the demat account ?. Can we find the investment in CDSL website reports ?.

  52. sameer says:

    Hello sir,

    thanks so much for the article. So as per you REC bond are better from below?
    Name Tenure price/unit YTM Coupon rate frequency face value
    REC Limited 39 months 1,155.35 4.35% 8.01% Yearly 1,000
    Housing & Urban Development Corporation Ltd 20 months 1,088.08 4.23% 8.10% Yearly 1,000

    As the YTM is better for REC

    pls clarify


  53. Das says:

    Why would you buy a bond that gives an yield less than Fixed Deposit?

    FaceValue = 1000 Rs , Coupon 80 Rs, but you are paying 1155. Nett coupon after 3 yrs = (240-115) = 125rs
    which is approx 4% return.

    • Karthik Rangappa says:

      It is 240 + 36 which you get back as accrued interest. Also you need to measure the return across time. Essentially compare the YTM with FD rate and then figure what works for you.

  54. Prakasan says:

    Dear Sir

    In settlement calculation given above, why the price of the bond is 1077 when the face value of the bond is 1000 only ?.

    Are the terminologies Price of the bond and face value of the bond same ?

    • Karthik Rangappa says:

      You need to read the concept of accrued interest. I’ve explained that in the chapter. So basically it is about accrued interest and a bit of premium.

  55. Prakasan says:


    The interest as yearly coupon we earn is [1000-115 (extra Pay & not returnable)] x 8.01% = 70.89. So the rate of interest is 70.89/1115*100 = 6.36 %.

    If this is the simple calculation without considering accrued interest, how the YTM is 4.34 % i.e. less than this rate ?.

  56. Ayush Kanodia says:

    Good Afternoon sir,
    It would be a privilege for me if you make us understand the meaning of convexity.

    Thank you in Advance.

  57. Ajay says:

    can I invest in Bharat bond ETF through Zerodha

  58. Prajata says:

    Net Yield = Net P&L / Buy price

    = 30 Lakh / 3 Crore

    = 9.09%

    – Is it not 10%??

  59. Pankaj Sangal says:

    Due to better service and lower charges, I decided to close my account of ICICI and shift all securities to my Zerodha account. ICICI shifted all securities except sovereign gold bonds (SGB). They inform me that current guidelines do not allow transfer of dematerialised SGB bonds from existing depository (NSDL) to CDSL (my depository of Zerodha). I would have to remateralize the SGB and then give them to Zerodha for dematerialisation. This would be very costly.
    However, if I shift from NSDL account (of ICICI Securities) to another NSDL account, it can be done without charge or procedures of rematerialisation/dematerialisation. As Zerodha is now also with NSDL (since March 2020), can I shift my SGB bonds to Zerodha NSDL account?

  60. Sandeep says:

    Dear Karthik Sir,

    Is there any maximum cap of Investment in these bonds (REC, NHAI etc.,)?


  61. Pankaj Sangal says:

    Unfortunately, as on date, the ground reality is that self transfer is not possible without rematerialisation/ dematerialisation i.e if one has to transfer SGB from own account ICICI DP (NSDL depository) to own account Zerodha (CDSL depository), the process is not the same as for any other security. My request for transfer cum closure has been held up for over a week now.

    • Karthik Rangappa says:

      Pankaj, this involves a bit of offline work, we are short-staffed due to the ongoing crisis and lockdown. Request you to please contact the support once.

  62. Sandeep says:

    Hi Karthik Sir,

    Tried purchasing these bonds, the max investment that can be made is Rs 150000(Face Value) – 150 Units. Is there any other place where I can purchase more than 1.5 Lacs?

  63. Sandeep says:

    Hi Karthik Sir,

    Couple of queries further,
    Whatever bonds I am purchasing here – Is it a secondary market purchase??or primary market purchase??

  64. Karan Patil says:

    What if I want to sell the bond before maturity. Can I do this? If yes, what price will I receive for it.

  65. Apoorv says:


    First i would like to thank you 🙂for explaining all of this in a very simple but elegant manner. I’ve been reading this personal finance module for a week now and am very grateful to have stumbled upon this.

    There are but some things which i am unable to understand so i hope you’ll clarify it for me:-

    1) Is YTM calculated on an yearly basis?

    2) I am unable to decipher how the YTM is 5.4% for the the REL bond? My reasoning goes like this:-

    If the current price of bond is 1115 and coupon rate is 8% then yearly 80₹ coupon can be obtained because coupon rate is calculated on the face value of bond. Since the tenure is 41 months and hence proportionally since we are getting 80₹ for 12 months so for 41 months the amount from coupon will be 273.33₹.

    Now after 41 months we’ll get 1000₹( face value of bond) + 273.33( coupons) = 1273.33 in total. Now since Cost price was 1115₹ and hence net profit we’ll get is 158.33₹. This total profit ( 41 months) when calculated on an yearly basis will be approx 46.34₹

    Now YTM is net profit for 1 year divided by cost price so that means 46.34/1115 which equals 4.15% not the given 5.4%. I don’t know where i am doing this wrong but thanks in advance for solving my issue.

    • Karthik Rangappa says:

      1) Yes, its a yearly number
      2) You are approximately right 🙂 The problem is that the calculation of YTM is a complex affair and requires a trial and error method, or you can use excel for this.

  66. Apoorv says:

    Typing mistake it’s REC not REL bond

  67. Sameer says:

    Can I invest in Capital Gains bond under section EC54 issued by REC, NHAI, PFC and IRFC through Coin?

  68. Rakesh Jain says:

    Hi Karthik,

    How I can buy NCD in secondary market , pls suggest. Thanks

    • Karthik Rangappa says:

      Look for the NCD in the marketwatch and place an order to buy or sell. However, I think the liquidity is quite poor.

  69. Pardeep Rawat says:

    Hi Karthink,

    Thanks for explaining such a complex topic in such a easy manner. I have few queries so please help me to resolve it.

    The company issue bonds for the first time and after certain days the issue gets closed. The company intended to raise 10K crores but it didn’t get fully subscribed (say garnered only 5k) . Please help me in answing below questions.

    1. So will the bonds worth 5K crores only get traded in the market now or the company still would have resources/ways to collect the entire 10k crores?

    2. Is company in any way impacted by the bonds trading in secondary market? I mean the company has got the intended money. The only thing it needs to do to pay annual coupon and later on pay bond’s face value. The company liability can’t be greater than face value plus annual coupon no matter what’s happening in secondary market. Am I correct?

    3. When I buy bonds then there must be some seller too. Who is the seller here? The company has already sold all its bonds in its initial offer. Could there be liquidity risks here?.

    • Karthik Rangappa says:

      1) Yes, that’s right
      2) No impact, it matters only till they raise money. From then on, they just have to service the coupon and not really worry about the price.
      3) Seller from the secondary market – just like the way stocks work.

  70. Apoorv says:

    Kartik sir,

    If we consider two bonds like- REC limited and Housing and Urban development corporation then as given above the price of former bond(1115) is higher than that of latter bond(1064). Also the coupon rate for former bond (REC) is 8 %( less than 8.1%). By these two parameters alone less profit can be earned from investing in REC bond then how it’s YTM (5.4%) is greater than that for the latter bond (5.2%) ??

    • Karthik Rangappa says:

      The answer to this depends on your yield expectation from other similar products available in the market 🙂

  71. Apoorv says:

    Karthik sir,

    Still😅 I am unable to understand what you’re trying to convey in “The answer to this depends on your yield expectation from other similar products available in the market” in the comment just above.

    Hence, I am hoping that you will clarify your statement a little bit more to me.🙂

    And thanks again for

    • Karthik Rangappa says:

      Hahah, what I mean is that if you expect say 6% from a similar instrument but with slightly higher credit risk, then probably you are better off wth 5.5% with lesser risk. Its like buying a car, you need to evaluate the pros and cons of each vehicle.

  72. Apoorv says:

    And thanks again for your module on personal finance. It is a boon for newcomers stepping into the financial world🙂

    • Karthik Rangappa says:

      Thanks, this is a work in progress module, will be adding more content at regular intervals. Hope you’ll like them as well 🙂

  73. Avinash says:

    What is the procedure to transfer Bonds from Parent to Son on Zerodha Coin Platform?
    Could not see the following listed anywhere – Kindly confirm their incorporation enabling us to transfer
    1. Housing and Urban Development Corporation Limited
    2. India Infrastructure Finance Company Limited
    3. Indian Railway Finance Corporation Limited
    4. National Highways Authority of India
    5. Power Finance Corporation Ltd.
    6. UTI- Mastershare

  74. Sanket says:

    Dear sir thank you so much for explaining Bond in simple language. as you said at end of maturity of bond we get coupon interest and value depend on redemption value. so what is redemption value? if face value of bond is 1000 so at the tme of maturity we get coupon interest+face value? or something related to redemption value you mentioned.

    • Karthik Rangappa says:

      It is the face value. You redeem the bond at its face value. It could be 1000, 10,000, or even 1,00,000.

  75. Pardeep Rawat says:

    Why YTM is considered very important? I mean if I’m going to pay 1115 to get 80.1/year as interest till bond maturity, all I should be concerned is (80.1/1115) –> 7.1% (this no. right) and compare it with other bonds and make my decision on where to invest…

    What am I missing here?

    Karthik Rangappa says:
    July 2, 2020 at 2:43 pm
    This makes sense if all bonds were bought at par, but since you either buy at a premium or discount to par, the YTM becomes more important than the coupon itself.

    Hi Karthik,

    I am sorry but I still didn’t get your point. Yes it’s true that most of the times we buy bonds either at premium or discount. But here if I am paying 1115 to get 80.1/yr as an interest till maturity so after 4 years I am likely to get a profit of around 205.4 (1000+320.4(80.1*4)-1115) reaffirming that for me, it’s giving somewhere around 7.1 % interest which is way significantly higher than YTM of 5.4%. Also If YTM gets fluctuated from here, I am not sure how would it impact my profit of 205.4 as an interest. Is there any thing which I am missing here. Please advise. Thanks!!

    • Karthik Rangappa says:

      The problem is that you are calculating 7.1% in absolute terms, whereas 5.4% is after factoring in time up to maturity.

  76. Pardeep Rawat says:

    Hi Karthik,

    One more question

    The settlement price seen is Rs.1115.47/-, which also includes the accrued interest. Therefore, you can break the settlement price into two components –

    Settlement Price = Price of the Bond + Accrued Interest
    = 1077.609 + 37.8615

    why price of bond is different (1077.609) from Rs 1115.03 which is given above in screenshot. In what regards/context they are different from each other? Please advise. Thanks

    • Karthik Rangappa says:

      The screen price includes accrued interest. Technically you pay the accrued interest upfront to the bond seller and you make it back later when the coupon gets paid.

  77. Aa says:

    Whether the latest 7.15% floating interest rate bond is fixed interest rate or they change the interest in upcoming years.
    Because they mentioning Floating rate like as NSC.

  78. Shivam says:

    hey sir,

    I have question that if i invest in the bonds once, will i be able to sell it before the maturity of the bonds.

  79. Devendra says:

    Hi Karthik,

    As I could see there are a lot of questions asked and answered, I could not go through all those. My question is that if I purchase a bond, say REC in our example, at a premium price of 1100 which is decided by Zerodha, is it that I can sell it at a further higher price? Who will decide the price in that case, I as an owner or Zerodha? If at a higher price, then will it be a capital gain and taxable? Please help clear this doubt.

  80. Riyaz Charania says:

    Hi Karthik,

    Thanks for this great piece of information.
    While calculating YTM, which price is considered – Clean Price or Settlement Price ?

  81. Bala says:

    Hi at present only 2 bonds are displayed in COIN. Is there any provision of buying other bonds like sbi n5 or so through coin. The kite app shows these bonds but ytm and other info are not present kindly clarify.

  82. venkatesh shendge says:

    thank you very much sir for sharing such great knowledge with us

  83. Somitra says:

    Sir the content is amazing , please add more topics in bonds like rbi bonds , soveŕeign bonds , corporate bonds , debentures , sovereign gold bond , international corporate bonds , foreign country bonds and ways to invest in them properly

  84. Jeganath T says:

    In which exchange can we sell the bond before its maturity? Does Kite allow it? or should we have to approach a third party platform?

  85. Hemachand balla says:

    Hi Karthik
    There is a typing error in 15.2
    REC bond pays the interest on 1st dec every ‘month’ .it should b year I guess.
    Thank u for the content🙏🏾

  86. Hari prabhu says:

    Hello Sir,
    Am really appreciate your work on Bonds..
    The way you give scenario’s is really unbeatable.. anybody knows English can understand easily !! Thanks again.

    Now i would like to know,
    1. Where i can get the complete list of bonds available ?
    2. I have account with Zerodha so no problem for me but outside Zerodha how one can buy this Bonds from there broker ?
    3. As you said Diversification, whats your suggestion on percentage of allocation for Bonds ?
    4. Is there any documents on varsity for more understanding on bonds ?

    Thanks for your time..

    • Karthik Rangappa says:

      Thanks, Hari! Glad you liked the content.

      1) The bonds page has whatever is available. Will list out more as and when they are available
      2) Not sure about that
      3) At present about 20%, but I’m also in the process of building a small portion of my savings to a balanced fund, which has debt component
      4) No, this is the only chapter.

  87. Aniket Hazra says:

    Hi Karthik,
    Thank you so much for Varsity. It has been of great help.
    I know it is hard to put up such quality content in short time but can you kindly mention when would you be able to discuss on the following point in Varsity.
    “In the coming chapters, I will discuss portfolio compositions and how you can set up portfolios to match your goals,…..” .
    Will it be after discussing the Mutual Funds metrics?
    Thank you again. 😊

    • Karthik Rangappa says:

      Thats right, before going ahead with portfolio construction, it is important to get familiar with few basic technicalities. Hence I’m spending time to discuss these, once done, we will transition in portfolios and fund selections.

  88. Prasad says:

    How to find ISIN of a bond, Coin does note display it. And searching by company name we can find many bonds for the companu and difficult to find the right one.

    E.g National Highway Authority Of India . I see one option to invest but dont know the exact ISIN to look at details.

  89. Sourav says:

    So basically YTM is the actual rate of interedt if I compare it with bank deposite?

  90. Kaushik Dana says:


    Many thanks for the really detailed and lucid explaination! Really nice!

    I found this material on BSE website ( which states that BSE “has
    commenced Clean Price based trading mechanism from August 08, 2016” and that “Orders will be matched on the clean price”. The NSE website ( mentions that “The bonds are traded & settled on Dirty Price i.e. including accrued interest, if any.”

    Does this mean that we can buy only on clean price on BSE but only on Dirty price on NSE?

    Kaushik Dana.

  91. Seeni Ramasamy Baskar says:

    Sir, In the section 15.3/ Scenario 3, For Net yield you have mentioned 70 lakhs /3 crore. But it should have been as 70 lakhs / 2.9 crore. Thank you.

  92. G madhu kiran reddy says:

    If I buy a sovereign gold bond in secondary market and if I keep the bond till maturity , can i get the capital gain tax exemption for the matured amount.

  93. Jaydeep says:

    Please make it available this module in Hindi asap…

  94. Akshayye says:

    Hi Team, Need your valuable inputs here.

    I bought PFC Tax-free bonds with (YTM: 4.43%, Coupon Rate: 8.30%, Frequency: Yearly, Maturity: 77 months).

    Q1: As per my understanding from above lesson, I will get dividends of 8.30% on my principal amount every year for 77/12 years period and 4.43% interest on principal on maturity. Am I right?
    Q2: How and where will I be credited 8.30% annual interest as I used coin to buy the bond?

    Thanks in advance.

  95. Seema Garg says:

    Does bond sell as fast as stock? How liquid is it?
    If on maturity you get only the principal amount then why would anyone buy the bond at higher price?

  96. Sukanta says:

    Hi Sir,
    I want to invest some money but not in equity. can you please suggest what will be the best place to invest

  97. Devyani says:

    Considering the ytm formula as
    Ytm equals annual interest+par value/#-market price/# # no of yrs to maturity
    par value/##+market price/## ## 2
    The ytm calculation dor the above example goes as
    ______________________ equals 12.07 percent which is 5.7percent in the above case.
    Please explain.
    Btw very well written. Keep it up!

    • Karthik Rangappa says:

      YTM calculation is not straight forward, requires the trial and error method. I’d suggest you use the excel function for this 🙂

  98. Gourav Dwivedi says:

    Today, I have purchased “National Highway Authority of India” bond. I can see in order basic details of bond on “Order bond” secction. So, where I can see my bond detials? And how I can get the bond certificate?

  99. Adarsh says:

    Hi Sir,
    Power Finance Corporation is currently showing total accrued interest -22.68. What does this negative value indicates?? And is it beneficial for an investor(Since it is to be subtracted from price of the bond), So does this means investor needs to pay less than its current settlement price?

  100. Aditya says:

    Hi Karthik,

    1) I have a slight confusion between YTM and Coupon rate. Let’s say a bond a bond has coupon rate of 8%, FV = 1000 and current price is 1100. Technically YTM should be = ((-100+80)/1000)*100 = -2% but this is given the bond matures in 1 year. Let’s say Time to maturity is 2 years. In that case the price premium loss will remain same = -100 but coupon interest would be 160, so in that case my net PNL is 6%, annualised to 3%. So in this case the YTM I see on the Coin UI would b 3% or 6% ?
    For simplicity assumed 0 accrued interest rate (I am investing exactly on a day 2 years before the coupon payment date)

    2) Given I don’t hold till maturity, I can still sell these bonds on the exchange right, just that the redemption price would be higher than FV, in that case my YTM would be improved right?

    3) When I sell a bond on the exchange I will just sell at the price based on bid-ask so is it assumed that naturally the accrued interest I deserve would be factored in by the market in it’s bond price ?

    4) Just like I can sell my bonds on the exchange and exit, can I buy bonds straight from KITE as well? what’s the difference in the bonds I see there versus the one’s I see on GoldenPi here ?

    Thanks in advance 🙂

    • Karthik Rangappa says:

      2) Yes, but then you may not have full liquidity
      3) True
      4) Yes, Kite allows you to buy/sell from the secondary market. GoldenPi is off market

  101. Aditya says:

    You can ignore the first one, I think I understood that.

    Just verify if this calculation of annualised YTM is correct, for the REC example: ((4*80.1 – 115.03)/1115.03 *100)*12/41 = 5.39%

  102. Aditya says:

    Thanks a lot for your reply

    For the 4th one, is there a difference between the ‘off-market’ bonds listed on goldenPi and the one’s available on Kite ? And if they’re off-market, how is the premium for these decided ?

  103. Aakash says:

    Hi Karthik,

    Thanks for the article. You mentioned SGBs for diversifying portfolio. I’m planning to buy 1 Kg in the upcoming RBI issuance at 5k/unit.
    Would love to know your thoughts if this would be a good investment or should I invest less/more?

    • Karthik Rangappa says:

      This depends on your outlook on Gold. Are you bullish on gold over the next few years, if yes, go ahead and buy 🙂

  104. Aditya says:

    Hi ,

    Currently the YTM of PFC is 4.39%, and for NHAI it’s 4.38% which means if I bought one bond at a premium price of 1200 which is having a facevalue of 1000 I will be having a profit of approx 4.39%

    1. Don’t you think this interest is very less compared to FD’s interest rates of many banks
    2. when my bond is matured will I get face value or premium value
    3. will the premium value be same during the maturity time.
    4. who is the seller of these bonds Zerodha or PFC.

    • Karthik Rangappa says:

      Thats right. The YTM considers both the FV and coupon flow.

      1) You need to adjust for tax as well
      2) Face value
      3) No, you will get the face value
      4) Bond houses

  105. Jalpa says:

    Hi Karthik,

    Sovereign Gold Bond scheme has opened yesterday. However, not sure how gold investment is going to look like in coming years as Gold prices saw sharp increase in last few months.

    Any view on that , Karthik?

  106. Aakash says:

    Hi Karthik,

    Great explanation again! With respect to the list of the “PSU Tax-free bonds” available in coin right now, I wanted to confirm if this is a comprehensive list of the available government bonds at the moment. If not, could you let me know where can we find the complete list.


  107. Aakash says:

    Also, when we calculate the overallreturns on a bond investment, should we use the simple interest or compound interest formulae with YTM as the interest rate?

  108. Krishna says:

    Hi Karthik Rangappa,
    Hope you are good
    Thanks for the article
    I have following query, please help me to understand better

    1). How much amount will I get after maturity period if I bought 1 lot of above REC bond example is it Rs.1115.03 or the face value Rs1000?

    2). Also who will buyback my bond after maturity, is it REC or do I needs to sell in open market?

    3). How can I buy bond which crossed half tenure of maturity period from the person holding it through open market, will there be any advantage if I buy like that?

    4). If I hold the bond up to maturity period, I will be receiving an annual interest of 8.04% every year, am I correct?

    5). Do I needs to sell mandatorily after maturity period or REC will continue to give me interest of 8.04% up to the time I am holding?

    Have a great day

    • Karthik Rangappa says:

      1) YOu will get the face value i.e. Rs.1000
      2) REC, upon maturity.
      3) In the secondary market
      4) Yes
      5) Yes, since the bond would no longer exist.

  109. URMIL says:

    How do i search other bonds for eg if want to invest in Muthoot Finance Bonds, where will i find search panel on the coin portal.

  110. Suyog says:

    Investing in Bonds is available in Hindi language ?

  111. Sonali Soni says:

    Hello sir,
    My question is if I invest in government bonds like NHAI 54EC bonds ,REC bonds etc at goldenpi ,then i can invest from only those amount which are capital gain and also those bonds are for lock in period of 5years ,but in case of Zerodha ,if I invest in NHAI ,REC bonds ,then I can invest from my own savings also and additionally there is also not lock in period of 5years i.e. I can sell bonds at any point of time, so why there is such a difference in terms and conditions of the same bonds at goldenpi and at Zerodha platform?

    • Karthik Rangappa says:

      Sonali, I’m not sure about the terms and conditions of transacting directly on Golden Pi. But are you sure about the lockin period?

  112. Sanjay says:

    I have head we can covert bond into equity. If yes ? May I know how that process works ?

  113. Nilesh Gaikwad says:

    You might want to change ‘every month’ to ‘every year’ in the sentence “REC bond pays the interest on 1st Dec every month, till the bond matures”.
    its just above point 15.3

  114. Kush Anand says:

    There is a misprint in third from last para in chapter 15.2. It should be 1st Dec of every year not month.
    How is the bond value 1077? How is this premium calculated??

  115. Sonali Soni says:

    Hello sir ,
    Yes I am sure that GOLDENPI provides government bonds like NHAI ,REC bonds etc for lock in period of 5 years.

  116. Muthuswami Ramesh says:

    Can I invest in corporate bonds through Coin?
    The Muthoot Finance bond issue which is open now is not available for investment.
    Similarly, Muthoot Fincorp’s bond issuance, last month, was not available for investment through Coin.
    Please help me identify the webpage/link in the website for investment in corporate bonds.

    Thank you.


  117. Pallab Halder says:

    Where can one find the ISIN of a bond which is available on coin platform?

  118. Py says:

    Where do we find ISIN number listed

  119. Full Pain says:

    I am in awe of your series

  120. Jim says:

    Thank you for the excellent content.
    My query is if I purchase NCD(SRTRANFINS-YQ) today (17-Nov-2020) from secondary market at 1005 ,having face value of 1000, with maturity date as 02-Nov-2021.
    what will be the effective yield rate, if I hold till maturity?


  121. Unnikrishnan says:

    Hi Karthik, What do i do if I want to buy bonds at the issue time so that i dont lose on YTM. Is it possible through Zerodha portal ? Also is there a limit as an individual, i can invest at one time or in mulitples ? thank you

    • Karthik Rangappa says:

      YOu can transact bonds in the secondary market through us, for the fresh (primary) issue, you may want to check with someone like GoldenPi.

  122. pravin bhandari says:

    I need to bought the REC bond for capital gain tax free bond.
    How I purchase from this a/c?

  123. Udayakumar says:

    PSU/corporate bond is it possible to exit before reaching maturity?, if so what is the policy and implications.

  124. Mazikeen says:

    You explain these terms so well. Can you please explain with a example, amount wise what happens at the end of the maturity of the bond, if its not too much to ask for.

    • Karthik Rangappa says:

      That would be getting into bond pricing, I think it will be a little out of scope for this discussion, hope its ok with you if I skip it 🙂

  125. Nitin Budhdev says:

    How to sell the bonds on Zerodha platform

  126. Chandrasekaran says:

    YTM at 4.34% shows that the ROI is clearly less compared to FD ROI. So to diversify the portfolio i don’t see bonds are giving any advantage over FDs.Please correct me if i still missed to understand the bonds.

  127. Rahul says:

    the REC bond pays the interest on 1st Dec every month, till the bond matures.

    Shouldn’t that be 1st of Dec every year?

  128. Gautam Sen says:

    How to buy NCD in secondery market.

  129. Shankar M R says:

    Hi Karthik,

    Why is REC not listed now in coin. I was assuming it to list until its maturity date(2023). And I dont see others as well like PFC, NHAI etc which is shown in the screenshot.

    I see only Indian railways bond.

    Shankar MR

  130. aarti says:

    sir when bonds are first floated in the primary market then do they get offloaded at their face value itself (say, $100 or Rs 1000)? Or their floating price is determined by the demand and supply forces in the primary market on which the issuing entity has no control whatsoever? And hence can’t be sure of the amount it will end up raising?

    Many thanks!

  131. aarti says:

    sir when bonds are first floated in the primary market then do they get offloaded at the face value itself (say, $100)? Or their floating price is determined by the demand and supply forces in the primary market on which the issuing entity has no control whatsoever? In other words, assuming the bond is subscribed more than once can the entity be 100% sure of the amount it could raise?

  132. Mayur says:

    Are PSU tax free bonds sold to the subscriber at a premium to the FV even at the time of initial public offering by the PSU or is the the price/unit indicated in the above example the secondary market price from another bond seller .

  133. Tamil says:

    Like equity IPO we can find details in exchange/broker platforms , for bond where we can find, if a company going to issue bond ? Thanks

  134. aarti says:

    Sir help needed!I am confused after reading the following sentence:

    “A bond that’s issued at Premium will always trade at a Premium, including at maturity.”

    I remember that last time when i had asked you whether bonds are first floated in the primary market at their par value or not, you said that they are usually quoted at par. So, in those unusual circumstances when bonds are issued at premium. how’s the premium decided on? And can they be issued at discount(below their par) in the primary market? Investment bankers do that, like they do for shares entering IPO?

    And two if even if they are issued at a premium why can’t they ever fall below the par value? Let’s say the interest rates have risen significantly in the market, won’t it cause people to shift away from the already issued low coupon bonds?

    Hoping for a very elaborate response! Pls sir my head just spins badly every time i hit this topic, called Brutal Bonds!

    • Karthik Rangappa says:

      Brutal bonds if funny 🙂

      The answer to both your question is the same – depends on three things (1) Demand supply situation (2) Perception of interest rates in the economy (3) Issuer’s credit rating. The premium is simply a function of these variables.

  135. aarti says:

    hello sir!

    I wanted to know if there is an average YTM figure for each category of bond( as in AAA, AA, BBB, C etc.) with similar maturities that could help me find whether my own bond is trading at a premium or discount? Because if i had an average benchmark figure for YTM of bonds similar to my own i can easily find whether my own bond is trading over or below its fair value.

    Thanks in advance!

  136. Ganesh says:

    Hi karthik!!
    If one purchase the bond on the issue price on the issue date and holds till maturity, will the yield is same as in scenario 1?
    Thanks in advance.

  137. Raam says:

    Hi Karthik,

    Thanks a lot for this. You made me understand the YTM concept really good with the illustration.

    I would like to know where can we look up the detailed version of the bonds in zerodha. i.e. where can i infer details such as redemption date,Frequency of interst payment etc?

    • Karthik Rangappa says:

      Thanks Raam. The quicket way to get the details is from the RBI site itself. Search for the bond and you’ll get the RBI link for that particular bond.

  138. K G Sahasrabudhe says:

    I wish to purchase SHRIRAM TRASPORT FINANACE/Tata /M & M / NCDS from market through ZERODA
    1.What is a procedure
    2.Any Brokarage
    3 Where shal I see the NCD list for sell and their quotation

  139. Anupam says:

    How can we invest in Bond market.

  140. Amol says:

    @Karthik Rangappa

    Couple of questions ,

    There are some bonds ,which are tradable in the primary market, as per below link.

    Can i buy/sell these bonds directly from Kite ?

    If yes then ,
    What are charges ?
    Where the interest will be deposited? in Bank Account or Zerodha account.

  141. Narayanan Nambudiri says:

    Is the coupon percentage calculated on a compounding basis or only on the face value of the bond?

  142. Sushrut Shendre says:

    Nice Article. I think there is a typo in the calculations in Scenario 3. The Buy Price should be 2.9 Cr and not 3 Cr.

  143. vaishakh says:

    Hello sir,
    yesterday I was going through information of the NCD bonds issued by ‘Sri Ram Transport Finance’ in which they have mentioned something as follows ;
    Initial Price Guidance = 4.65% area & Coupon = Fixed, semi-annual, 30/360.
    so, what is this Initial price guidance ?

  144. Bharath says:

    Sir will REC interest rate goes down when bond price increases and vice versa

  145. Narayanan Nambudiri says:

    If the coupon rate is on the face value of the bond, on a long run the FDs should give a better returns as it compounds your money on renewal (even though the stand-alone interest rate would be low). Or am I missing something here to understand?

    • Karthik Rangappa says:

      Purely from a compounding perspective, yes. However, you can always reinvest the coupon back to another asset, but I agree that’s a bit cumbersome.

  146. P SRINIVAS says:


  147. Tanmay says:

    Where do i find the ISIN code? It’s not listed on the Bond’s Investment Page.

  148. Ravi says:


    Is it possible to pledge Bond holdings for F&O Margin and if yes will it we considered as a cash component or a non cash component?

  149. Mayank Agrawal says:

    What are different ways to invest in all types of bonds? Where can we get details of ETFs that can be purchased through kite? Can we purchase taxable bonds through coin?

  150. Yuvaraj Raju says:


    Thanks for all your efforts,

    I have a query in SBG, Whether can we get the 2.5% interest if we buy an SGB (SGBJUL28IV or SGBAUG28IV) unit from the trading account.

  151. Vishal says:

    Dear Team,
    Please confirm if we can buy National Highway Authority bond through Zerodha?
    If yes, kindly provide step to buy it.

  152. Asha Singh says:

    Very easy to understand. Nice Read. Request you to kindly come with a read on :
    A) Portfolio allocation for 25 yrs Guy- Income 10 L / Annum. Savings 5 L per annum
    B) Portfolio allocation for 53 Yrs Guy – Income 5 L / Annum. Savings 2 L per annum.
    C) Which one will you prefer – Gold ETF or Sovereign Gold Bond ?
    With lots of respect

    • Karthik Rangappa says:

      Asha, towards the end of this chapter, have highlighted a few portfolio strategies that you can use. Do check that chapter. Thanks.

  153. manju choudhary says:

    Thanks for your valuable knowledge
    1. YTM is minimum secured or final return.?
    2. On the Maturity of bond , during selling per unit price will be applicable that time real price not less then 1000/- or fixed 1000/- per unit.

  154. Vinod says:

    Beautiful class.Thank you

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