The government securities market provided annualised returns of 8.18 per cent in the last 10 years, according to a new gilt index launched by ratings agency Crisil.
The returns are low, compared to the equity indices Sensex and Nifty that gave around 18 per cent returns in the same period.
The Indian debt market lacks depth and is dominated by government bonds. The size is Rs 29 lakh crore, of which Rs 23-24 lakh crore is accounted for by government securities.
"There is a need to increase retail exposure in the government bond market. The Crisil Gilt Index is expected to serve both as a benchmark and as an underlying index for investment products such as exchange-traded funds in government securities," said Tarun Bhatia, director (capital markets), Crisil Research, on the launch of the gilt index that is based on yields as on January 1, 1997.
The index would cover movements of long-tenor government securities and can be used by asset managers and pension fund managers to benchmark their debt funds.
Currently, the average maturity of securities in the index is 10.8 years.
The index comprises the 12 most liquid government securities, based on volumes traded, days traded and the number of trades.
"The government securities included in the index are the most liquid and typically represent 80 per cent of the total trading volumes and 25 per cent of the total amount outstanding in government securities," said Mukesh Agarwal, senior director, Crisil Research.
Thereafter, weights are assigned on the basis of the amount outstanding on the security. The minimum and maximum weightage is 3.1 per cent and 11.7 per cent, respectively.
Bhatia said Crisil was working towards a series of indices on the corporate bond market, too.
