In the realm of financial wisdom, Shyam Maheshwari stands as a steadfast advocate for the inclusion of fixed income as an integral component of any core investment portfolio. With a comprehensive analysis, Maheshwari highlights the evolving landscape of fixed income investments, emphasizing their crucial role in providing stability and returns.
Traditionally, fixed income foundations were laid with instruments such as bank deposits and savings accounts. However, Shyam Maheshwari SSG observes a noteworthy shift over time, where mutual funds, particularly those with liquid plans, have emerged as favorable alternatives, offering superior tax-adjusted returns compared to conventional bank deposits.
Despite this transformation, Maheshwari identifies a notable gap in investor awareness and risk pricing concerning direct bonds, Non-Convertible Debentures (NCDs), and securitized products. He emphasizes that while mutual funds present a viable avenue for participating in bond markets, the potential exists for constructing dynamic portfolios based on individual preferences for specific bonds.
Drawing a parallel with the United States, Shyam Maheshwari SSG points to the transformative role played by Mike Milken of Drexel in accelerating the bond market’s development. Milken’s financing of the leveraged buyout wave in the 80s through the development of the “junk” bond market reshaped market dynamics, introducing novel concepts that were previously non-existent.
In the context of India, Maheshwari proposes key initiatives to foster bond market growth:
- Encourage individual participation in the bond market by reducing bond denominations, providing tax incentives, and enhancing issuer disclosure for increased retail investor confidence.
- Allow financial institutions, including pension funds and insurance companies, to invest in sub-investment grade bonds gradually, enabling institutional-level scrutiny of issuer credit quality.
- Simplify tax deductions for issuers without requiring knowledge of the holder’s tax status, shifting the onus to holders to fulfill their tax obligations.
- Permit tax deductions for leveraged buyout transactions.
Maheshwari asserts that as India embarks on high single-digit GDP growth in the coming decades, a robust bond market is imperative alongside its well-established equity markets. He draws a parallel with the unprecedented growth in retail participation in equity markets in the late 90s, envisioning a similar trajectory for bond markets, making them vibrant and deep. According to Maheshwari, fixed-income markets globally are as vital as multiple equity markets, making a compelling case for their integration into well-rounded investment portfolios.