Market Linked Debentures or MLDS can be stated simply as debt
securities where the return on investment the investor gets
totally depends upon the market index’s performance.
Market Linked Debentures are basically fixed-income structured
products that give no periodic coupons but pay only at
maturity.
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Types of Market Linked Debentures
1. Principal protected mlds
Principal-protected market linked debentures (PP-MLDs) is a
structured financial instrument offering a blended product of
fixed-income and market-linked returns and guaranteeing the
payback of the principal amount at the time of maturity. These
are popular mld investment options for risk-averse investors.
These investors aim to protect their principal amount invested
and are ready to get a comparatively lower interest rate than
other market linked debentures.
2. Non-principal protected mlds Non-principal
protected mlds are the debentures in which the investor will
not get the principal amount he invested while buying it
because the issuer company clearly works as per the conditions
that at the time of adverse market conditions, the company is
not liable to pay to its investor even the principal amount.
Market Linked Debentures are generally issued for a tenure
ranging from 13 months to 60 months.
Market Linked Debentures (MLDs)
are debt instruments wherein the investors are generally
sophisticated investors as this product is complex and has
a high investment value.
MLDs
come with a Capital Protection feature wherein here it is
guaranteed that you will get back at least the principal
amount on maturity, even if the movement in the other
market is severely adverse i.e., your downside is
protected because in the worst case, you will get zero
return but will get your investment amount back. On the
other hand, if the movement in the other market is
favourable, you will get commensurate returns.
The
ticket size of MLDs generally are Rs. 25 lakh or more.
MLDS unlike binds do not pay regular fixed income. It pays
the income only on maturity. It provides investors falling
in the HNI category to invest in customised product.
Bonds and debentures - Investors are found looking
for bonds and debentures. It is a good idea to have
a mix asset in your portfolio to minimize risks and
increase returns.
A
percentage of investment in
bonds and debentures can be a good choice for
risk-averse individuals. Generally, a widely traded asset
is chosen as the underlying asset so that it is not easy
to manipulate
NCD investment – your decision related to
NCD investment can prove fruitful incase you choose
the issuer having good credit ratings. The level of risk
is high in unsecured Non-Convertible Debentures (NCDs).
As an
individual it is better to seek Expert Advice at
BondsIndia prior to NCD investment and investment
in other securities.
Market Linked Debentures are generally issued for a tenure
ranging from 13 months to 60 months.
Market Linked Debentures (MLDs)
are debt instruments wherein the investors are generally
sophisticated investors as this product is complex and has
a high investment value.
MLDs
come with a Capital Protection feature wherein here it is
guaranteed that you will get back at least the principal
amount on maturity, even if the movement in the other
market is severely adverse i.e., your downside is
protected because in the worst case, you will get zero
return but will get your investment amount back. On the
other hand, if the movement in the other market is
favourable, you will get commensurate returns.
The
ticket size of MLDs generally are Rs. 25 lakh or more.
MLDS unlike binds do not pay regular fixed income. It pays
the income only on maturity. It provides investors falling
in the HNI category to invest in customised product.
Bonds and debentures - Investors are found looking
for bonds and debentures. It is a good idea to have a mix
asset in your portfolio to minimize risks and increase
returns.
A
percentage of investment in bonds and debentures can be a
good choice for risk-averse individuals. Generally, a
widely traded asset is chosen as the underlying asset so
that it is not easy to manipulate
NCD investment – your decision related to NCD
investment can prove fruitful incase you choose the issuer
having good credit ratings. The level of risk is high in
unsecured Non-Convertible Debentures (NCDs).
As an
individual it is better to seek Expert Advice at
BondsIndia prior to NCD investment and investment in other
securities.
Risk – Risk is associated with the market linked
debentures as the return calculated on the investment is
highly dependent on the underlying market index. Resulting
if the market couldn’t perform well, then the investor may
not earn interest.
Credit Risk of Issuer – For any debt instrument,
either (PP-MLD) or (NPP-MLD), the amount of risk, whether
higher or lower, is associated from the issuer’s end.
While investing, an investor should calculate the
creditworthiness of the company.
Liquidity – MLDs are not as liquid as other debt
instruments like bonds because they don’t have any
secondary market, and the investor cannot resell them.
Maturity – Market-linked Debentures have a fixed
date of maturity, and the investor is only liable to get
the principal amount along with earned interest at that
point in time only.
Returns – The return on investment in MLDs depends
on the market index. Here, the investor can earn higher
returns on investment if the market performs well.
Risk – Risk is associated with the market linked
debentures as the return calculated on the investment is
highly dependent on the underlying market index. Resulting
if the market couldn’t perform well, then the investor may
not earn interest.
Credit Risk of Issuer – For any debt instrument,
either (PP-MLD) or (NPP-MLD), the amount of risk, whether
higher or lower, is associated from the issuer’s end.
While investing, an investor should calculate the
creditworthiness of the company.
Liquidity – MLDs are not as liquid as other debt
instruments like bonds because they don’t have any
secondary market, and the investor cannot resell them.
Maturity – Market-linked Debentures have a fixed
date of maturity, and the investor is only liable to get
the principal amount along with earned interest at that
point in time only.
Returns – The return on investment in MLDs depends
on the market index. Here, the investor can earn higher
returns on investment if the market performs well.
Difference between MLD (Market Linked Debentures) and NCD
(Non-Convertible Debentures)
MLDs
and NCDs are two types of debt instruments companies issue
to allocate the required funds from investors.
NCD
is basically fixed-income security where the issuer
assures to pay a fixed interest rate on the principal
amount to the investor. Non-Convertible Debentures can’t
be converted into equity shares of the issuing company, as
the name suggests, "non-convertible". It has a specified
maturity period, after which the investor can redeem the
principal amount and the accumulated interest.
On
the contrary, Market Linked Debentures are structured
products linked to the performance of the market index or
asset, like commodities, currencies and stocks. MLDs
return on investments is not fixed because it is linked to
the underlying asset’s performance. So, the returns on
MLDs are higher than NCDs when the market performs well
but can be negative or zero when the market isn’t
performing well.
Why Invest in Market Linked Debentures (MLDs)?
The Market Linked Debentures have their own importance and are
preferred by investors willing to take risks for a higher
return on investment. Debentures are chosen for a higher fixed
or floating interest rate quickly.
Advantages of Investing in Market Linked Debentures (MLDs)
Bonds
Diversification
Investors look forward to investing their money in
different investment options to diversify their
portfolios and avail maximum returns on their
investments.
Yield on Investment
Investing in Market Linked Debentures generates a
high yield on investments because market linked
debentures do not provide any coupons, and the
investor will get the whole principal and interest
earned at maturity.
Ease of Investment
Investment in Debenture has been made easy for
investors. Investors today can make a comparison
for a better decision. BondsIndia allows you to
make comparisons online for the potential
investment in bonds.
Advantages of Investing in Market Linked Debentures (MLDs)
Bonds
Diversification
Investors look forward to investing their money in
different investment options to diversify their
portfolios and avail maximum returns on their
investments.
Yield on Investment
Investing in Market Linked Debentures generates a high
yield on investments because market linked debentures
do not provide any coupons, and the investor will get
the whole principal and interest earned at maturity.
Ease of Investment
Investment in Debenture has been made easy for
investors. Investors today can make a comparison for a
better decision. BondsIndia allows you to make
comparisons online for the potential investment in
bonds.
Who Should Invest in Market Linked Debentures (MLDs)?
MLD in the finance sector is also a good investment option for
common investors. MLDs are commonly preferred by business
families, offices, or HNIs (High Net Worth Individuals)
looking for a good post-tax return.
BondsIndia is a highly sought online platform for bonds and
other securities. You can browse through the different product
categories for the hassle-free potential trade in bonds.
Investment in non convertible debentures can be a good choice
for investors interested in receiving periodic interest on the
investment made.
If you are not yet a member and would like to explore more about
bonds,
The decision to invest in Market Linked Debentures
solely lies with you. It is better to explore online
the relevant information for a better decision.