India’s Capital Markets 3.0 – Opportunities and Way Forward

Posted on October 15, 2025November 12, 2025 by Auburn Solutions

India’s Capital Markets 3.0 – Opportunities and Way Forward

India’s capital markets have entered a new phase of development, building on decades of rapid evolution. Over the past thirty years, the market has progressed through distinct phases – from the foundational digitization of trading in the 1990s (Capital Markets 1.0), to broad-based growth and product expansion in the 2000s and 2010s (Capital Markets 2.0), and now into an emerging era that we might call Capital Markets 3.0. This latest phase is characterized by greater institutional participation, deeper global integration, and the rise of new platforms and instruments that are reshaping how capital is raised and traded.

This article traces the journey from Capital Markets 1.0 and 2.0 into today’s 3.0 landscape. It examines key trends such as the surge in retail investors and demat accounts, the boom in derivatives trading and the regulatory responses it spurred, and the promise and pitfalls in the small and medium enterprise (SME) segment. It also outlines upcoming structural shifts – including the inclusion of Indian bonds in global indices, the expanding role of long-term domestic institutions, and the emergence of innovative avenues for fundraising and risk management. Finally, the discussion places India’s market development in a global context by comparing key metrics with peers like the United States, China, the United Kingdom, and Singapore. The article concludes with recommendations for policymakers and regulators to foster balanced, robust growth of the capital market ecosystem.

Capital Markets 1.0: Laying the Digital Foundations

In the early 1990s, India’s capital markets underwent a fundamental transformation that laid the groundwork for modern trading. Before this period, stock trading was largely manual and confined to regional exchange floors, with paper share certificates and lengthy settlement cycles. The introduction of electronic trading and centralized depository systems revolutionized this landscape. The launch of the National Stock Exchange (NSE) in 1994, with its fully automated trading platform, introduced unprecedented transparency and speed to the market, challenging the traditional broker-run exchanges. Around the same time, the Securities and Exchange Board of India (SEBI) was empowered with statutory authority (in 1992), bolstering regulation and investor protection. A cornerstone of Capital Markets 1.0 was the dematerialization of securities – moving from paper certificates to electronic records. By the late 1990s, the establishment of depositories (NSDL in 1996, followed by CDSL) enabled investors to hold stocks and bonds in dematerialized form, eliminating problems such as lost certificates and delayed transfers. Settlement cycles, which once took weeks, were gradually shortened to a few days. These developments greatly improved market efficiency and connectivity. Nationwide trading networks and internet-based platforms allowed investors across the country to participate in markets remotely. By the early 2000s, India had built a modern market infrastructure – a stark contrast to the earlier era of open-outcry trading – setting the stage for the next phase of growth.

Capital Markets 2.0: Broadening Participation and Product

Expansion With digital infrastructure in place, the 2000s and 2010s ushered in an era of rapid market expansion and innovation. Capital Markets 2.0 was defined by a sharp rise in participation, especially among retail investors, and the introduction of new products and segments that added depth to the market. A pivotal development was the launch of exchange-traded derivatives. NSE introduced equity index futures in 2000, followed by options and singlestock futures. These instruments gained traction quickly, providing new avenues for speculation and hedging. Over the next two decades, India’s derivatives segment exploded in volume, eventually making the country one of the world’s largest derivatives markets by number of contracts traded.

This era also saw steady growth in direct retail investing, aided by rising household incomes and easier access through online brokerages. Demat accounts grew into the tens of millions, and a new generation of techsavvy investors joined the fray, attracted by the ease of trading and periods of strong returns in equities. The primary market experienced cycles of boom and lull: robust IPO issuance in mid-2000s and again around 2016–2018 and 2020–2021, interspersed with quieter periods during economic downturns. A dedicated SME exchange platform was launched in 2012 (BSE SME and NSE Emerge) to enable smaller companies to tap equity markets. Though uptake was initially modest, it laid the groundwork for the flurry of SME offerings that would come in the next decade.

Domestic institutional participation also increased in 2.0, with mutual funds channelling more household savings and foreign portfolio investors (FPIs) becoming significant market drivers after capital account liberalization. Episodes of volatility – such as the global financial crisis of 2008 – tested the market’s resilience, prompting regulators to tighten risk management norms and improve transparency. By around 2020, India’s capital markets had expanded significantly in scale and scope compared to the turn of the century, laying the foundation for the next chapter of evolution.

Capital Markets 3.0: Integration, Institutions, and Innovation

By the mid-2020s, India’s capital markets have entered a new phase – what we can call Capital Markets 3.0 – marked by deeper institutionalization and greater global integration. In this phase, institutional investors are playing a larger role alongside retail. Domestic pools of capital – such as pension funds, insurance companies, and mutual funds – have grown substantially and now provide a more stable base of demand for equities and bonds, often counterbalancing the influence of FPIs. At the same time, foreign investor interest remains high, extending beyond equities into debt as well.

Global connectivity is a defining feature of 3.0. A landmark development is the inclusion of Indian government bonds in major global bond indices, which is set to attract significant foreign inflows and integrate India’s debt markets with global capital. Additionally, the emergence of GIFT City as an international financial center reflects India’s intent to bring offshore financial activities onshore. GIFT City’s exchanges allow trading of certain securities in foreign currency and have become a platform for international investors to access Indian markets with fewer frictions.

Innovation continues to define this era. New tools for fundraising and investment have emerged – from Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), which unlock capital in real assets, to green bonds and other thematic debt issuances that fund sustainable projects. The regulatory environment has also evolved to enable more sophisticated risk management tools, such as frameworks for credit default swaps and interest rate derivatives, for eligible participants. Essentially, Capital Markets 3.0 involves expanding and deepening the market, making it more diverse in terms of participants and products, and aligning it better with global standards. While this progress offers significant opportunities, it also requires careful oversight to ensure the market develops in a balanced and stable way.

Key Trends Shaping India’s Capital Market Landscape

Surge in Retail Investors and Demat Account Proliferation:Retail investor participation in India has seen a significant surge in recent years. By early 2025, the number of demat accounts is projected to reach approximately 200 million, marking a rapid expansion driven by several key factors. Technological advancements such as the widespread adoption of e-KYC processes, user-friendly mobile applications, and digital platforms have simplified the account opening process. Additionally, favorable economic conditions, such as low interest rates and increased financial inclusion efforts, have made investment more accessible to the general population.Currently, over 100 million individual investors are active in the Indian retail market, forming a substantial and growing segment. These investors are drawn to positive market trends, the prospect of wealth creation, and the convenience of simplified account setups. Despite this growth, there are inherent challenges. Many new investors lack sufficient experience, which makes them vulnerable to misinformation and impulsive decisions. Consequently, investor education becomes crucial, alongside robust regulatory frameworks to ensure investor protection and maintain market integrity.

The Rise and Regulation of Equity Derivatives Trading India’s retail trading boom has propelled the rapid growth of its equity derivatives market, led by the NSE, making it one of the world’s busiest exchanges by contracts traded. Driven by retail investors attracted to high leverage and low entry barriers in index options and futures, daily turnover often surpasses underlying cash market activity. However, this surge has raised concerns, as studies reveal many retail traders incur net losses, with losses increasing as volumes grow. Regulators have responded by tightening oversight: increasing margin requirements, raising contract lot sizes, limiting short-term expiries, and mandating clearer risk disclosures from brokerages. These measures have tempered trading volumes somewhat but the market remains highly active. The key challenge now is balancing liquidity and price discovery with retail investor protection, ensuring sustainable growth without undermining confidence. The evolving, data-driven regulatory approach aims to mitigate risks while fostering a resilient derivatives environment.

SME Listings: High Hopes and Growing Pains The recent surge in SME IPOs, driven by investor enthusiasm and a strong market environment, highlights both opportunities and risks in small business financing. After 2012, SME-specific exchanges experienced low activity until 2023-24, when a speculative craze led to dozens of companies, even those with regional operations or limited earnings history, being oversubscribed by 100 times or more. Such enthusiasm, often driven by social media hype, created a misleading belief of quick, certain profits. However, actual post-listing results showed liquidity shortages and volatile prices, leaving many investors stranded. Recognizing these risks, regulators have implemented measures such as price movement caps and discussions on more extended lock-in periods to reduce extreme volatility and encourage serious, long-term investment. This trend highlights that increasing access to capital must go hand in hand with strict safeguards, good governance, and investor education to ensure the SME platform remains a true engine for growth rather than a bubble.

Structural Changes and Opportunities on the Horizon

Global Bond Index Inclusion: A New Chapter for Debt Markets

India’s inclusion in global bond indices marks a pivotal milestone. By 2024-25, Indian sovereign bonds could constitute around 10% of emerging-market benchmarks, unlocking an influx of over $30 billion in portfolio investments. This development validates reforms like enhanced market infrastructure and the “Fully Accessible Route,” boosting foreign participation. As passive and active funds realign, liquidity and depth in India’s debt market are expected to improve, potentially lowering borrowing costs and fostering the development of derivatives markets. However, increased foreign exposure may heighten sensitivity to global risk shifts, requiring vigilant macroeconomic management. Overall, this strategic move not only broadens capital access but also accelerates maturity in India’s bond market, supporting economic growth and financial stability. It’s a critical step toward integrating India more deeply into the global financial system.

Expanding Domestic Institutional Participation

The evolving landscape of the Indian market highlights the increasing influence of domestic institutional investors such as the NPS, provident funds, life insurance companies, and mutual funds. Traditionally driven by foreign portfolio inflows that set market trends, the market now benefits from the growing dominance of local investors, who provide stability and serve as a counterbalance during global volatility. These institutions, with significant surpluses allocated to equities and bonds, have become consistent net buyers, even amid FPI exits, helping to stabilize prices and support long-term growth. This change reduces reliance on foreign sentiment, making markets less vulnerable to sharp swings. For policymakers, promoting domestic institutional investment through favorable regulations, relaxed limits, and greater transparency is essential. Ultimately, a strong domestic institutional presence will deepen liquidity, improve corporate governance, and support sustainable market development.

New Instruments and Platforms for Growth

India’s capital markets are diversifying with innovative instruments like REITs and InvITs, providing developers alternate avenues to unlock asset-based capital and offering investors steady income and exposure to real estate and infrastructure. These vehicles, initially met with skepticism, are now well-established, attracting both institutional and retail participants, and shaping a new fundraising landscape. Concurrently, reforms aim to invigorate the corporate bond market by relaxing trading and face value norms, and broadening participation through credit default swaps. Municipal bonds, though nascent, highlight local government financing potential. On risk management, derivatives such as currency and interest rate futures are gradually expanding, helping stakeholders hedge against market fluctuations. Collectively, these innovations strengthen the ecosystem, boosting market capacity and efficiency. The key challenge remains scaling these products, ensuring liquidity, and educating investors on associated risks and returns, to fully realize the transformative potential of India’s evolving capital markets.

India’s Capital Markets in Global Perspective

India’s capital market, valued at over $3 trillion, ranks among the top five globally, reflecting significant financial development. However, relative to its vast economy, market-based financing remains underdeveloped, with Indian firms predominantly relying on bank loans rather than equity or bond markets. This dependence limits potential growth avenues and market efficiency. Household participation is also relatively low; few retail investors directly engage in equities or bonds, constraining domestic investor base expansion. Enhancing financial literacy and promoting inclusion are critical to broadening participation, which could unlock substantial growth opportunities. An increasing number of young Indians entering the investing sphere signals a future where the market could play a crucial role in funding national development. Strengthening regulatory frameworks, encouraging innovative financial products, and deepening market infrastructure will be vital in harnessing this potential. As investor confidence and participation grow, India’s capital market could become a more robust engine for economic growth and development, aligning with its aspirations as a leading global financial hub.India’s financial markets exhibit notable differences when compared to advanced economies. Its equity market capitalization roughly equals its GDP, similar to developed nations, but its corporate bond market remains small—around 20% of GDP—lagging behind the US, Europe, and China, limiting funding options and investment opportunities. Recent initiatives to include Indian bonds in global indices aim to bridge this gap. While India has expanded its financial product offerings— such as derivatives, commodities, and REITs—there’s still room for growth in asset-backed securities and long-term hedging instruments. As the market evolves, these gaps are expected to narrow, fostering a more robust and diverse financial ecosystem.In summary, India’s capital markets are large and dynamic, but they still have considerable potential when compared to peers. Recent macroeconomic stability and reforms have built a solid foundation. Continuing to expand participation, deepen the debt markets, and diversify instruments will help India approach the scale and efficiency of more established global markets, while supporting higher investment and growth home.

Way Forward: Ensuring Balanced Market Development

To seize the opportunities of Capital Markets 3.0 while managing risks, stakeholders must adopt a proactive and balanced approach. Key recommendations include:

Strengthen Market Infrastructure and Resilience: As trading volumes and complexity increase, exchanges and clearing corporations should consistently upgrade their technology and risk management systems. Reliable trading platforms with backup systems and robust clearing safeguards— such as sufficient margins, stress testing, and default funds—will help maintain stability even during periods of volatility. Regulators and market institutions must collaborate on surveillance and data analysis to identify and resolve vulnerabilities promptly.

Deepen and Diversify the Bond Market: Reducing over-reliance on bank credit requires a vibrant corporate bond market. Policymakers should promote greater public bond issuance by simplifying regulations and offering credit enhancements to lower-rated issuers, thereby facilitating their access to markets. Allowing institutional investors, like insurers and pension funds, greater flexibility to invest in a broader range of debt instruments with proper risk controls can direct more long-term funds into corporate bonds. A more developed debt market will give companies alternative ways to raise funds and provide investors with more fixed-income options.

Enhance Investor Protection and Literacy: With millions of new retail participants, investor education becomes crucial. Regulators and exchanges should expand financial literacy programs that cover the basics of investing, risk management, and fraud prevention. At the same time, they should enforce strict disclosure and suitability rules, ensuring complex or high-risk products are only sold to investors who understand them. Vigorous enforcement against malpractices, such as insider trading and mis-selling, along with transparent communication about market risks, will help preserve trust as the investor base expands.

Facilitate Innovation with Safeguards: Embrace financial innovation by enabling new products and fintech platforms to develop within regulatory sandboxes or pilot frameworks. Whether it involves new digital trading mechanisms or innovative instruments, a proactive approach can help keep Indian markets competitive. However, pair innovation with clear guardrails, such as closely monitoring algorithmic and high-frequency trading for fairness and requiring thorough risk assessments for complex derivatives. This way, efficiency gains can be achieved without compromising market integrity.

Promote Balanced Growth and Consistent Policies: Policymakers should promote balanced development across all parts of the capital market. This involves preventing any single segment (such as short-term speculative trading) from overshadowing the primary roles of capital formation and long-term investment. Specific measures, such as updating SME listing standards and increasing oversight when necessary, will help new segments grow on a healthy foundation. Lastly, maintaining a stable and predictable regulatory and tax environment, especially for foreign investors, is essential. Consistent policies will attract steady, long-term capital, both domestic and foreign, and reduce disruptive changes, supporting a healthy, broad-based market evolution.

Originally Published in The PRIME Directory-2025.

Author: Dr. V. Shunmugam – Partner MCQube

How REITs & InvITs can now tap into more retail money

Posted on October 15, 2025November 12, 2025 by Auburn Solutions

SEBI has reclassified Real Estate Investment Trusts (REITs) as ‘equity,’ while Infrastructure Investment Trusts (InvITs) remain in the hybrid category.

The markets regulator has changed how mutual funds can treat investments in real estate assets. Real Estate Investment Trusts now get the ‘equity’ tag but Infrastructure Investment Trusts remain in the hybrid category. For investors, this means more choices within mutual funds, explains V Shunmugam

How do REITs and InvITs work as investment vehicles?

SHARES OF REAL estate developers offer exposure to gains from rising property prices, but Real Estate Investment Trusts (REITs) go further—they channel rental income from offices, malls, and warehouses directly into your portfolio. This means you’re not only betting on property valuations; you’re also sharing in the steady income those properties produce.

Infrastructure Investment Trusts (InvITs) expand this concept to infrastructure by pooling money into highways, power lines, and renewable projects, allowing investors to access tolls, usage charges, and contracted revenues—cash flows that were previously available only to operators.

With the Securities and Exchange Board of India (Sebi) changing the rules, REITs are now classified as part of the equity category and may soon enter equity indices, while InvITs remain in the hybrid category but benefit from their full ‘10% NAV’ headroom. Together, they bring investors closer to the tl

Market capitalisation of REITs and InvITs

The total market capitalisation of REITs across the four listed trusts as of mid-2025 exceeded Rs 1 lakh crore. That amounts to over Rs 2.25 lakh crore in assets under management, with steady rents, high occupancy, and regular payouts to investors. Meanwhile, InvITs have also expanded — with 17 listed InvITs, the combined market cap of REITs and InvITs is about Rs 9 lakh crore.

Started in 2019, these instruments are no longer experiments. They’re becoming substantial enough to behave like equities in many ways: they trade, they yield, they attract investor attention. And now, with Sebi’s change in classification, there’s more room for InvITs investments to grow, and for REITs to benefit from being part of equity indices and equity-oriented portfolios.rue value of India’s property and infrastructure assets.

What’s in it for the investor

FOR INVESTORS, THE benefit is straightforward: more choices within the mutual funds they already know. A regular equity scheme can now include REITs, giving investors not just exposure to property prices but also a share of the rental income from offices, malls, and warehouses — almost like owning real estate without the hassle. InvITs take this idea to infrastructure by pooling money into highways, power networks, and renewable projects, passing on part of the steady tolls and contracted revenues to investors.

Mutual funds & their investment buckets to benefit

PREVIOUSLY, REITs AND InvITs shared a common investment cap within mutual funds. If a fund manager wanted to allocate more to REITs, it would reduce the amount of funds available for InvITs, and vice versa. Now, REITs are fully placed in the equity bucket, leaving InvITs with the entire space under the hybrid category. This change simplifies portfolio design for fund managers in asset management companies. They can now use REITs to strengthen the equity portion with stable rental income while also increasing the InvIT exposure, enabling long-term infrastructure cash flows.

Impact on stock market indices

THE RECLASSIFICATION ALLOWS REITs to be included in equity indexes. Once that occurs, index funds and ETFs tracking those benchmarks will automatically invest in REITs. This will increase visibility, liquidity, and investor participation in the real estate sector. Meanwhile, InvITs continue to provide stable income options within hybrid and solution-focused funds. Together, these changes strengthen the connection between household savings and India’s real asset sectors, benefiting both investors and the broader economy.

With REITs moving into the equity bucket, InvITs now get the full 10% NAV headroom under hybrids, giving them more space to grow. This shift directs larger pools of capital into both real estate and infrastructure, strengthening two pillars of India’s growth story. As institutional investors step in, trading volumes are likely to rise, making price discovery in these markets more transparent and efficient.

Entry of new strategic investors

SEBI HAS ALSO expanded the strategic investor category under the REIT and InvIT framework to include pension funds, insurance companies, provident funds, large NBFCs, family trusts, and major financial institutions. Their inclusion brings stable, long-term capital and supports early demand in primary issuances. For retail investors, this means increased confidence, improved liquidity, and more accurate price discovery in real estate and infrastructure markets.

Author: Dr V Shunmugum, Partner – MCQube

This article was originally published in the Financial Express (https://www.financialexpress.com/business/how-reits-amp-invits-can-now-tap-into-more-retail-money-3982059/)

Retirement Planning: Solving Finance’s “Nastiest Problem”

Posted on October 3, 2025December 1, 2025 by Auburn Solutions

There is an old Yiddish proverb that says “Man Plans, God laughs”. This proverb beautifully sums up the dilemmas we face when we plan for retirement. As William Sharpe, the Nobel Laureate, famously said – “retirement is the nastiest, hardest, problem in finance”. Simply because there are multiple layers of uncertainty around inflation, life expectancy, investment returns and lifestyle choices, the problem is strictly not solvable. There will always be risks you cannot eliminate. There will always be circumstances you cannot anticipate.

Inflation is the biggest unknown. It is next to impossible to estimate the amount of income you will need during retirement because inflation will erode your purchasing power over time. For example, if we assume that long term inflation is 4%, the amount of money you need to spend to maintain your standard of living will double every 18 years. So, if you retire at 60 and are spending Rs.10 lakhs per annum, by the time you are 78 you will need Rs.20 lakhs and by the time you are 96 you will need Rs.30 lakhs. However, if you assume an inflation rate of 6% instead of 4%, you will need Rs.30 lakhs by the time you are 84, a full 12 years earlier! The best option, therefore, is to assume a higher rate of inflation in your calculations. The next big problem is on making assumptions on how long you will live. For India, the Life Tables indicate that the average remaining life expectancy at 60 is 17.5 years for men and
19.2 years for women – an average of 18.3 years for Indians. But this does not make any sense for an individual because you cannot be 50% dead at 78 – you are either dead or alive! Your individual lifespan has no statistical validity. The sensible assumption would be to plan for a 100 -year life.

The investment return question is also a complex one. The answer derives from your asset allocation choices. The danger in investing for the long term in fixed income is that you sacrifice the ability to preserve purchasing power because your portfolio returns may not be able to keep up with inflation. On the other hand, if your portfolio is overweight equity, you risk losing your principle. This require you to do a fine balancing act of not being overweight fixed income and having a reasonable exposure to equity at all times.

Your lifestyle choices will determine how long into retirement your money will last. Spending is normally higher in the early active retirement years, lower mid-retirement and then increases again mainly because of healthcare costs. The assumption you make should not be just a multiple of your spending but must be determined by your understanding of what you need to lead a more fulfilling life.

Hopefully, this approach will make the retirement problem a little less nasty!

Author: Mr. Shashi Krishnan, Director – NISM

Your simple guide to the Indian debt market & how to learn more

Posted on September 30, 2025November 12, 2025 by Auburn Solutions

If you’ve ever put money in a fixed deposit or a PPF (Public Provident Fund) account, you’ve already participated in the debt market. But this market is much more exciting than that and has a lot more instruments.

The Indian debt market has undergone a quiet revolution. From a relatively small market a decade ago, it has expanded dramatically. The total market size has grown more than threefold, from about ₹68 trillion in 2014 to over ₹226 trillion (over $2.6 trillion) by the end of 2024. This growth has been fuelled by economic reforms, regulatory changes, and increasing participation from both Indian and global investors.

This blog will tell you how you can be a part of this growth opportunity, and I will talk to you about a course that can help you in your investing journey.

The three pillars of the Indian debt market

The debt market can be broadly divided into three main segments, each serving a different purpose.

Money Market: This is where short-term borrowing and lending happen, for periods up to one year. It helps banks, companies, and the government manage their daily cash flow needs. Some of the key instruments are i) Treasury Bills (popularly known as T-Bills), ii) Commercial Papers (CPs), iii) Certificates of Deposit (CDs), etc.
Government Debt Market: This is the oldest and largest segment (accounting for nearly 60%) of the market. It consists of Government Securities (popularly known as G-Secs). These are bonds issued by the Reserve Bank of India (RBI) on behalf of the central and state governments. They are considered risk-free from default because they are backed by the Indian government.
Corporate Debt Market: This is where companies borrow money directly from investors by issuing bonds and debentures. This market has seen explosive growth in the recent past. According to RBI Financial Stability report, June 2025, in the financial year 2024-25, Indian companies raised a record ₹9.9 trillion through corporate bonds. These bonds typically offer higher returns than government bonds to compensate investors for the higher risk.

How can you, as an Investor participate in this market

Gone are the days when bonds were considered as an investment instrument only for institutions. Today, thanks to regulatory changes and technology, it’s easier for retail investors like you and me to participate.

The table below shows some common debt instruments and their characteristics.

Instrument	Typical Yield	Risk Profile	Liquidity
Government Securities (G-Secs)	6 – 7%	Very Low (Risk Free)	Moderate
Corporate Bonds (AAA Rated)	7 – 8.5%	Moderate	Moderate
Fixed Deposits (FDs)	6 – 7.5%	Low	Low
Debt Mutual Funds	7 – 9%	Low to High	High

*The information provided in the above table is indicative and for educational purposes only. Please consult a SEBI registered investment advisor before making any decisions.

You can participate in the Indian debt market through the RBI Retail Direct Scheme. Its a platform that allows you to directly invest in government securities. Online bond platforms are another medium which allow you to browse and buy bonds with ease, much like stocks. Check SEBI’s list of registered online bond platform providers here. Another way to invest in Indian debt instruments is debt mutual funds which are managed by professionals.

Understand the Indian debt market with this NISM & FIMMDA Course

The “Overview of Indian Debt Markets” course, jointly developed by the NISM and the Fixed Income Money Market and Derivatives Association of India (FIMMDA), is designed to provide a comprehensive understanding of the Indian debt market.

The course is structured into three modules that is same as the three pillars of Indian debt market we discussed.

Money Market: Explains various instruments, trading mechanism, and benchmarks
Government Debt Market: Explains types of instruments and how they are issued
Corporate Debt Market: Explains corporate bonds and their issuance process

The course is entirely online, giving you the flexibility to learn over a period of 30 days. It has around 3 hours of learning content including interactive quizzes. The course fee is ₹2000/- plus taxes. And when you successfully complete the course, you will receive a joint certificate issued by NISM and FIMMDA.

Whether you’re a student, a professional in banking, or an investor, the course will help you build a solid foundation in the Indian debt market. Explore the course details and feel free to reach out (elearning@nism.ac.in) if you have any questions.

These are some of the other courses jointly offered by NISM and FIMMDA, covering various aspects of the fixed income securities market.

Introduction to Fixed Income Securities

Introduction to Fixed Income Mathematics

Introduction to Interest Rate Derivatives

Happy learning!

Author: Sandeep K Biswal, Deputy General Manager – CCC, NISM

Do you want to move beyond fixed deposits and explore other debt market products?

Posted on September 29, 2025November 12, 2025 by Auburn Solutions

Do you want to move beyond fixed deposits and explore other debt market products?

For many Indians, their go-to for safe investing has been the trusted Fixed Deposit. It’s familiar, and it feels secure. But have you ever wondered what else is out there in fixed income securities world? A world that offers potential for better returns than a standard FD, but requires a bit more knowledge. Maybe you’ve heard terms like “government bonds,” “corporate bonds,” or “debentures,” and curious to know more. Let us understand what exactly is this “Fixed Income Securities” World and can they play a role in helping you meet your financial goals.

So, what exactly is this “Fixed Income Securities” World all about?

When we talk about investing, most people instantly think of the stock market. Investing in shares of listed companies hoping their value will go up. But there’s a whole other World of investing out there known as Fixed Income Securities (FIS). This world is generally considered as more stable, in comparison to stocks.

The simplest way I can explain you about fixed income securities is, think of you as the bank. You lend your money to the Government or a corporate. In return, they promise to pay you regular interest (the “fixed income” part) and give you your original investment (principal) back after a period, as agreed.

This market is the backbone of the Indian financial system in terms of government raising money for infrastructure and development projects. It’s also where corporates raise capital to fund new projects. While the stock market gets all the headlines, the fixed income securities market is where the steady money flows.

As an investor, you need to understand the different types of fixed income securities (based on issuer, maturity, coupon rates), and the risks involved. Yes, it’s generally considered safer than equities, but you still face risks, such as:

Interest Rate Risk: When interest rates go up, bond prices go down.
Credit Risk: Probability that the issuer might not be able to pay you back.
Liquidity Risk: Can you easily sell your bond if you need cash?
And other risks like inflation and reinvestment risk.

Understanding the fixed income securities market is important. Whether you’re an investor, working in the financial sector, or a student. This foundational knowledge is exactly what the “Introduction to Fixed Income Securities” eLearning course provides.

Introduction to Fixed Income Securities eLearning course

This course comes has some serious credibility as both NISM and FIMMDA have jointly developed this for professionals working in banks, broking houses, asset management companies, and students aspiring to enter the financial sector. But let me tell you, course will prove incredibly valuable for anyone having an interest to understand where a large part of India’s money moves.

NISM offers more than 60 eLearning courses

As I have already said, this is a foundational course, and so the course modules include

An overview of the Indian fixed income securities market where you’ll learn about the ecosystem, the role of regulators like SEBI and the RBI, and how monetary policy affects this market.
Types of fixed income securities where you’ll learn about various categories of securities in terms of issuer, maturity, coupon type, and more.
Risks associated with investing in fixed income securities where you’ll learn about different types of risks involved and how to manage them.

This being an eLearning course, you can learn at your own pace, on your own schedule. The course has around 3 hours of learning content including interactive quizzes. Once you register, you get 30 days of access, which is a comfortable amount of time to complete the course. The course fee is ₹2000/- plus taxes. And when you successfully complete the course, you receive a joint certificate issued by NISM and FIMMDA.

Now should you register? Whether you’re a student aspiring to join the Indian financial sector, a professional looking to build upon your existing skills, or an investor who wants to move beyond fixed deposits, understanding about various fixed income securities, the risks involved, and how to manage those risks will definitely give you an edge. I hope this course proves to be a smart choice for you.

In addition to this, NISM and FIMMDA jointly offer the following courses covering various aspects of the fixed income securities market. You may like to have a look.

Overview of Indian Debt Markets

Introduction to Fixed Income Mathematics

Introduction to Interest Rate Derivatives

Happy learning!

Author: Sandeep K Biswal, Deputy General Manager – CCC, NISM

The Buyback Mirage – How EPS Gets a Cosmetic Lift – Real EPS Growth vs. Finance Magic

Posted on September 25, 2025November 12, 2025 by Auburn Solutions

The Buyback Mirage – How EPS Gets a Cosmetic Lift – Real EPS Growth vs. Finance Magic

Corporate share buybacks are back in the headlines. In 2025, U.S. companies announced buybacks exceeding about $1 trillion by August, led by technology and financial majors. India has seen activity too: listed firms repurchased roughly ₹48,000–49,000 crore (~$5.8 billion) in 2023 and about ₹13,500 crore (~$1.6 billion) in 2024, with large, cash-rich companies like Infosys undertaking repeated programmes. These figures sound impressive, and buybacks often lift stock prices in the short run. But the finance behind them is subtle. This note explains, in simple terms, why buybacks can create an artificial sense of earnings growth, why valuations sometimes rise on optics rather than economics, and why reinvestment, especially in growing markets like India, usually drives superior long-term results.

What a buyback actually does

When a company buys back its own shares, it reduces the number of shares outstanding. Mathematically, earnings per share (EPS) increase even if total profit does not change. If a firm earns ₹10,000 crore and has 1,000 crore shares, EPS is ₹10. After a 5% buyback (share count falls to 950 crore), EPS becomes ~₹10.53 without any improvement in sales, margins or cash flows. Price/earnings (P/E) can appear cheaper, and the stock may rise. But the operating engine is unchanged.

From a corporate-finance lens, this is a payout decision just like a dividend, but executed by purchasing shares rather than sending cash to bank accounts. Under the famous Modigliani–Miller logic (perfect markets, no taxes, no frictions), payout form does not create value; only positive-NPV investments do. In the real world, taxes, signalling and market microstructure matter, so buybacks can have effects—but these are essentially distribution mechanics, not value creation by themselves.

EPS growth vs economic growth

Analysts should separate accounting ratios from economic value:

Economic value rises when the company adds future free cash flows by launching products, expanding capacity, improving productivity or building moats.
EPS rises in a buyback because the denominator (share count) shrinks. This is arithmetic. It can be helpful, but it is not the same as growing the enterprise.

A cleaner lens is the value growth equation:

Long-run growth (g) ≈ Reinvestment Rate × Incremental ROIC (return on invested capital).

If a company stops reinvesting and returns most cash via buybacks, its reinvestment rate falls. Unless incremental ROIC was low or opportunities were absent, that decision lowers g. If the market valuation still assumes high growth (say 10–12%), the P/E today embeds reinvestment that may never materialise. In time, the share may face a de-rating when reality catches up.

Why buybacks can appear to “work”

Three forces make buybacks look powerful:

Float reduction and index mechanics. Reducing free float creates scarcity and can increase a company’s weight in indices, attracting passive flows. Prices rise because supply falls, not because future cash flows increase.
Tax preference. In the U.S., capital gains tax is deferred until sale, whereas dividends are taxed when paid. This pushes boards to favour buybacks. (Tax treatment differs by country and can change.)
Low-rate funding (last decade). When borrowing costs were very low, some firms levered up to buy back stock, which boosted EPS faster than organic growth could, especially in the U.S.

None of these forces guarantees sustainable value creation. They improve per-share optics and sometimes short-term returns, but they do not, by themselves, expand the company’s productive capacity.

India’s context: a reinvestment market

India remains a growth market, with opportunities arising from formalisation, infrastructure, manufacturing, digitisation, and rising consumption, where incremental ROIC can exceed 15-20%. In such an environment, every rupee retained and reinvested in the core business can compound intrinsic value faster than a rupee spent on buybacks, especially when share valuations are already rich.

The local data are instructive. Buyback totals of about ₹48,000–49,000 crore (~$5.8bn) in 2023 and ₹13,500 crore (~$1.6bn) in 2024 are meaningful, yet small relative to India’s capex cycle and funding needs. Several large firms have conducted repeated buybacks; cumulatively, some programmes (e.g., in IT services) run into tens of thousands of crores (~$4-5bn). These are legitimate ways to return cash, but for high-ROE/high-ROIC businesses with a long runway, reinvestment usually dominates over time.

When buybacks make sense and when they don’t

In corporate-finance terms, capital allocation follows a hierarchy:

Fund all positive-NPV projects in the core business (organic capex, R&D, product development).
Consider M&A only if it passes strategy and return hurdles.
Return surplus cash via dividends or buybacks only after (1) and (2) are satisfied.
Price discipline for buybacks is critical: repurchases add value only when the stock trades below intrinsic value. Buying at 35–40× earnings in a high-ROE firm can be value destructive relative to reinvesting at 18–20% ROIC.
Avoid debt-funded buybacks unless leverage remains conservative under stress. Raising debt to retire equity reduces equity cushion and can increase risk if rates rise or cash flows weaken.

For beginners: think in NPV. If the IRR on reinvestment is comfortably above the cost of capital, keep building. If not, return cash, and if buying back, ensure the repurchase price < intrinsic value. EPS accretion is not the test; per-share intrinsic value accretion is.

The valuation illusion

High-quality businesses often command premium multiples because investors expect sustained reinvestment at high incremental returns. If management instead runs large buybacks year after year, the company’s reinvestment rate quietly falls. Growth slows from, say, 12% to 4-5%, yet the stock might still trade at a multiple that assumes 12%. For a while, the EPS still rises (because share count falls), and valuation holds up. Eventually, the market notices the slower engine and the multiple compressions. The earlier outperformance then looks artificial, driven by accounting arithmetic and multiple support, not by true expansion of cash flows.

How other markets compare

United States: The world’s most buyback-heavy market. Large, consistent programmes have contributed materially to per-share EPS growth and index performance over the past decade. Supportive factors were tax treatment, deep credit markets, and abundant passive flows.
Europe: Buybacks have grown, but are more varied by country and sector, with banks and consumer firms increasingly active in recent years.
Japan: Reforms in corporate governance and pressure to improve capital efficiency have encouraged rising buybacks and cancellations, alongside higher dividends.
Emerging markets (ex-India): Activity is uneven; many companies still focus on capex-led growth and balance sheet strengthening.

The common theme is that buybacks are most celebrated in situations where mature businesses generate cash faster than they can find high-return projects. In younger, faster-growing economies, reinvestment typically delivers better compounding.

High-ROE is not a licence to repurchase

A frequent misconception is: “Our ROE is 20%+, so buybacks must be great.” Not necessarily.

Buybacks can inflate ROE because the equity base (denominator) shrinks. Profit may be flat, yet ROE rises.
Opportunity cost matters: if you can deploy ₹1,000 crore at 18–20% incremental ROIC, that beats retiring shares at 40× earnings (a 2.5% earnings yield).
Resilience matters: cash used today is unavailable for downturns, platform investments, or strategic acquisitions tomorrow.

The correct question is not, “Will the buyback raise EPS?” It is, “Does the buyback raise intrinsic value per share more than the next best use of cash?”

A simple checklist for investors and students

Track the drivers: Are revenue, operating profit and free cash flow growing, or is EPS doing all the heavy lifting?
Estimate organic growth using g = Reinvestment Rate × Incremental ROIC. If buybacks are large, ask whether g is being diluted.
Check price discipline: At what multiple is the company repurchasing? A buyback above intrinsic value transfers wealth from continuing to selling shareholders.
Watch leverage and interest cover when buybacks are debt-funded.
Could you read the capital-allocation framework in annual reports and investor letters? Good managers explain the order of cash uses and the hurdles for each.

India’s edge: compounding through reinvestment

For India, the message is clear. We are in a multi-year cycle of capex, formalisation and productivity gains. Many companies can still reinvest retained earnings at attractive rates. That makes reinvestment the first call on cash, not buybacks. Of course, if a stock is trading well below intrinsic value, a measured buyback can be value-accretive after growth projects are funded and balance sheet strength is preserved.

The message behind the scenes

Buybacks are a tool, not a strategy. They are excellent when they transfer cash to shareholders at the right price and after funding high-return growth. But they do not create new cash flows by themselves. Markets that rely heavily on buybacks may show strong per-share optics and higher valuations. Yet, part of that return is manufactured by arithmetic and scarcity, not by expansion of the economic engine. Markets that prioritise reinvestment at high incremental returns—like India today—tend to deliver truer, more durable compounding.

Invest where the next rupee earns more than the last. EPS can be engineered; intrinsic value must be built.

Author:
Mr. Biharilal Deora, Director @ Abakkus Asset Manager

85% of Bonds Below 5% Yield – What It Means for Global Markets and India

Posted on September 25, 2025November 12, 2025 by Auburn Solutions

The global bond markets are a significant indicator of the current financial landscape. With nearly 85% of outstanding bonds now trading at yields below 5%, it’s clear that we’re witnessing profound structural shifts in global credit, corporate balance sheets, and investment cycles. This low-yield environment carries significant consequences for companies, policymakers, and investors, and it’s crucial to understand its implications.

When interest rates remain compressed, firms with outstanding borrowings find it much easier to refinance. Instead of paying 6-7% on old loans, they can now roll them over at 3–4%. The advantages are obvious: a lower interest bill that directly boosts profitability, and longer debt maturities that strengthen financial resilience. In other words, low yields quietly act as a tailwind, reducing financing pressure without the need for revenue growth.

Another hallmark of this cycle is the exceptionally low level of defaults. S&P Global data shows that global corporate defaults in 2024 were around 2%, well below the long-term average of 4-5%. A significant factor contributing to this is the deleveraging that occurred following the COVID years. Global corporate leverage, measured by Net Debt to EBITDA, has improved from about 3.2x in 2020 to roughly 2.6x in 2025. US companies alone reduced net debt by more than $500 billion between 2021 and 2023, while European corporates also cut leverage to multi-year lows. With stronger balance sheets and fewer defaults, creditors are more willing to lend, and companies are in a better position to pursue new projects with less risk.

Normally, such conditions would trigger a fresh borrowing and investment cycle. With capital available at 3-4%, project hurdle rates drop, and more projects become viable. We saw something similar in the early 2000s, when low post-2001 rates led to a surge in global capex and strong emerging-market growth. Yet today, the pattern is slightly different. Despite cheap debt, many multinational companies are funding growth using equity and internal accruals instead of piling on leverage. The scars of past excesses are still visible, and corporates appear far more disciplined this time around.

For India, this global backdrop is especially encouraging. Indian corporates already rank among the least leveraged in the world. Net Debt to EBITDA for NSE India Nifty 500 companies has fallen sharply to ~1.2x in FY25, compared with over 2.5x just ten years ago. Leading groups such as Reliance, Tata, and Aditya Birla are consciously financing expansion through equity, retained earnings, and strategic partnerships rather than relying solely on bank borrowings. In FY25, corporate capex crossed ₹11 trillion (about $126 billion), and a large share of this was equity-financed. This approach ensures that Indian corporates can continue investing aggressively while keeping their balance sheets healthy.

When we look at the past 15 years, the contrast becomes even clearer. Globally, leverage has only fallen modestly, from ~3.2x in 2020 to ~2.6x today. Indian companies, on the other hand, have almost halved their leverage over the last decade. This unique position of India, entering a capex upcycle from a position of balance-sheet strength, is a reason for optimism about India’s financial future.

The last time yields were this low on a global scale was after 2008, during the era of quantitative easing. That phase was marked by heavy debt issuance but also unsustainable leverage. The present environment is different. Corporates are refinancing with caution, not over-borrowing. Indian firms are expanding with limited leverage, and equity-funded capex is reducing systemic risks while still driving growth.

For investors, the implications are straightforward. Fixed-income returns are compressed, encouraging greater flows into equities and alternatives. India, in particular, stands out. Strong corporate balance sheets and disciplined financing underpin growth here. The combination of deleveraging and rising capex is rare and history shows that such a backdrop often precedes multi-year equity market cycles.

The global low-yield environment, therefore, presents a rare alignment: cheaper refinancing, low defaults, and healthier balance sheets. For India, the alignment is even stronger. With corporates already deleveraged and capex mainly funded through equity, the country could be on the verge of its most sustainable growth phase in decades. For investors, the lesson is clear: when debt is cheap and balance sheets are strong, growth cycles tend to follow and India is exceptionally well placed to benefit.

Author:
Biharilal Deora, Director @ Abakkus Asset Manager

India’s Online Retail Flywheel: Digital Is Becoming the Default

Posted on September 25, 2025November 12, 2025 by Auburn Solutions

India’s consumption story is entering a structural, data-driven phase. What was once a convenience for a small urban cohort has become a nationwide habit: discovery, decision, and delivery are now increasingly digital. The complex numbers show why this shift is durable and why it strengthens India’s domestic demand rather than merely cannibalising offline retail.

What the latest India chart tells us

A recent multi-source report on “Rising preference of online retail in India” ( Deloitte Analysis, Swiggy DRHP, E-Com Express DRHP, Unicommerce) captures the arc clearly:

Total retail market (online + offline): from ~US$715 bn in 2018 to ~US$1.37–1.38 tn in 2025, and further to ~US$2.2–2.26 tn by 2030E.
Online retail: ~US$110–120 bn in 2025, rising to ~US$250–270 bn by 2030E – almost a 2.2× scale-up in five years.
Online penetration implied by these ranges: ~8–9% in 2025, improving to ~11–12% by 2030E (headline categories will be far higher).
D2C market: US$87 bn (2025) to US$267 bn (2030E) – a ~3× jump as brands bypass traditional channels.
Quick commerce: US$2.9–3.5 bn (2023) → US$5.2–6.1 bn (2024) → US$35–40 bn (2030E) – proof that “instant convenience” has become a mainstream behaviour, not a niche experiment.

In short, India is tracking towards a US$2.2T+ total retail economy by 2030 with a rapidly expanding online core, and two powerful adjacencies i.e. D2C and quick commerce which are compounding the shift.

The demand side: young, connected, confident and transacting more often

Smartphone reach: India has ~650–700 million smartphone users today and continues to add tens of millions annually.
Data consumption: Indians are among the highest per-capita mobile data users globally, with monthly usage per subscriber measured in dozens of GB, fuel for video discovery, live commerce and social shopping.
Income tailwind: Rising per-capita income and greater formalisation of employment are lifting discretionary categories i.e. electronics, beauty, travel, fashion and home improvement.
Trust infrastructure: Ratings, no-questions-asked returns and platform guarantees have lowered perceived risk, taking first-time buyers from “browse-only” to “buy now.”

Result: frequency and basket size are both trending up. The consumer is digital-first in behaviour, even before becoming high-income in wallet size.

The supply side: India’s world-class digital rails

India’s decisive advantage is infrastructural:

Real-time payments at near-zero cost: UPI has normalised instant, interoperable payments for everything from ₹50 kirana purchases to high-value electronics. In calendar 2023, UPI processed well over 100 billion transactions, with monthly run-rates now in the double-digit billions. This materially lifts online conversion and reduces cash-on-delivery friction.
Paperless onboarding: Aadhaar-enabled eKYC, account opening, and digital signatures have collapsed merchant set-up time from weeks to hours.
Data-sharing with consent: The Account Aggregator framework enables responsible credit underwriting, expanding BNPL/checkout credit for thin-file customers.

When payment and identity rails are public-good infrastructure, trust is cheap and scale comes earlier.

Logistics and fulfilment: speed with discipline

Coverage: E-commerce logistics networks today service 20,000+ PIN codes, covering the bulk of India’s consumption centres.
Unit economics: Higher stop density, micro-fulfilment, automated sortation, and dynamic routing are reducing per-order cost even as speed improves.
Return discipline: Better size guides, pre-shipment checks and exchange-first flows are curbing costly reverse logistics in fashion and electronics.
Service standards: Same-day delivery is now standard in metro clusters; 10–30 minute fulfilment for top essentials is rapidly spreading beyond the top 8 cities.

As density rises, each incremental order is cheaper to serve, creating a virtuous loop for platforms and sellers.

MSME digitisation and the rise of platform businesses

Setting up a digital storefront has never been easier:

SaaS tools provide catalogues, GST invoicing, reconciliation and analytics out of the box.
Logistics APIs allow merchants to ship nationwide from day one.
Marketplaces, influencers and live commerce offer demand pipes without upfront capex.
Open networks such as Open Network For Digital Commerce (ONDC) broaden reach and reduce gatekeeper dependency.

This democratisation of distribution expands the long tail of entrepreneurship and formalises spending that was previously invisible.

How India compares with China, the US and others

Online penetration of retail: China remains the world leader with ~25–30% of retail sales online (depending on category and time period). The UK is typically ~24–26%, and the US sits around ~15–17% on a blended basis. India’s implied ~8–12% trajectory (2025→2030E) shows headroom rather than saturation and the opportunity is in catch-up growth.
Digital payments: China’s super-apps ( Alipay / WeChat Pay ) dominate, but India’s public, interoperable model of UPI (NPCI BHIM ) is unique. On both transaction count and merchant acceptance density, India now operates at global-scale daily volumes with near-zero MDR, a strong catalyst for digital commerce in low-ticket, high-frequency use cases.
Logistics cost curves: China’s coastal clusters and US interstate freight deliver scale benefits; India is closing the gap through dedicated freight corridors, highway upgrades and tech-led last-mile orchestration. Crucially, India’s labour-and-tech blended model supports ultra-fast fulfilment at costs viable for mass-market baskets.

The implication is that India is structurally earlier on the S-curve, but with world-class rails already in place. That combination of low penetration + high infrastructure readiness is what creates the multi-year compounding runway.

What this means for categories and cohorts

Grocery & essentials: Quick commerce’s climb from US$3–6 bn (2023–24) to US$35–40 bn by 2030E indicates that “planned convenience” (weekly top-ups, fresh and pharmacy) is now habitual.
Electronics & appliances: The online share is already high; same-day delivery plus checkout credit expands ticket sizes.
Fashion & beauty: D2C’s projected rise to US$267 bn by 2030E will be led by brands that win on fit, community and repeatability; return-rate discipline remains the key margin driver.
Travel & services: Search and booking are nearly entirely online; cross-sell of insurance and credit creates superior unit economics.
B2B and Kirana enablement: Digitised procurement and working-capital credit increase throughput of neighbourhood stores; many will double as local pickup and return nodes will lead to omnichannel by design.

Why is this net-positive for India’s domestic demand

The shift online is not a zero-sum duel with physical retail. It formalises spending, widens access for smaller sellers, and deepens financial inclusion by pulling households into digital payments, credit and savings. By 2030, with ~US$250–270 bn of online GMV and a US$2.2T+ total retail economy, India’s digital commerce will:

Lift tax-compliant turnover and credit access for MSMEs.
Create new profit pools in logistics, SaaS, fintech and creator ecosystems.
Improve consumer surplus via better prices, faster fulfilment and wider assortment.
Generate productivity gains that recycle into higher wages and consumption.

Bottom line: India combines the world’s most used data pipes, a public-good payments backbone, cost-effective logistics, near-universal smartphones, and rising incomes. That is why digital is becoming the default and why the ballooning volume of digital transactions will continue to power India’s domestic consumption story for years to come.

Author:
Biharilal Deora, Director @ Abakkus Asset Manager

Embedding Enterprise Risk into India’s Regulations

Posted on September 10, 2025December 1, 2025 by Auburn Solutions

When people hear the term “risk management,” they often associate it with financial markets, insurance, or corporate governance. In reality, risk is omnipresent — embedded in daily operations, decision-making, and strategic planning across every sector.

Recognizing this truth, India’s Directorate General of Civil Aviation (DGCA) has issued draft guidelines for implementing a Fatigue Risk Management System (FRMS) in airlines — an initiative that reflects how risk governance is expanding across sectors to protect people, operations, and public trust.

A Shift from from Compliance to Integrated Risk Governance
Historically, pilot fatigue was managed through prescriptive measures: fixed flight duty periods, mandated rest requirements, and strict duty-hour limits. While these measures created a baseline of protection, they often failed to account for evolving operational complexities such as cumulative fatigue, unpredictable delays, irregular disruptions, and the unique dynamics of each route or crew schedule.

FRMS represents a more sophisticated, performance-based approach. It uses data and science to monitor fatigue, assess risk in real time, and take early action to prevent incidents. Crucially, this shift reflects the essence of Enterprise Risk Management (ERM): integrating risk considerations into strategic and operational decision-making so that organizations can anticipate threats, capitalize on opportunities, and build resilience — going well beyond simple compliance

Risk Management Beyond Finance: Aviation as a Case Study
The implementation of FRMS demonstrates that risk management is not a financial function but an enterprise-wide discipline. Fatigue is not just a “crew welfare” issue — it is an operational risk with the potential to impact passenger safety, airline reputation, and financial performance.

The Institute of Risk Management (IRM), headquartered in the UK, established in 1986, is the world’s leading professional certifying body for Enterprise Risk Management (ERM) qualifications, training, and examinations. IRM has long advocated for such a holistic approach, where risks are assessed, prioritized, and mitigated across all functions. The DGCA’s FRMS guidelines illustrate this shift in practice: treating fatigue not as an isolated regulatory metric but as a strategic risk that must be governed with the same rigor as financial or cyber risks.

Embedding Risk Culture: Safety as a Core Value
IRM defines risk culture as the collective values and behaviors that shape how risk is perceived and acted upon. Successful FRMS implementation will depend on building a culture in which:

Crew members feel empowered to report fatigue truthfully, without fear of punitive action.
Management treats fatigue reports as a driver of continuous improvement rather than an operational
inconvenience.
Leadership consistently reinforces that safety is non-negotiable, even when weighed against commercial
pressures.

This mirrors IRM’s emphasis on the “tone at the top” and shared accountability — ensuring that risk awareness is embedded in daily decision-making rather than confined to manuals and compliance checklists.

Clarifying Risk Appetite: Balancing Safety and Operations
ERM also calls for clarity on risk appetite — the amount and type of risk an organization is prepared to
accept to achieve its objectives. For airlines, this means explicitly defining:

What levels of fatigue-related risk are tolerable?
When should schedules be restructured, or flights rescheduled, to protect crew alertness?
How should operational and commercial impacts be weighed against long-term safety outcomes?

By formalizing their risk appetite, airlines create decision-making clarity for crew schedulers, operations managers, and executives, ensuring consistency across the organization and reinforcing passenger safety as a strategic priority.

Risk Management Standards: Governance and Continuous Improvement
The DGCA’s draft guidelines call for formal documentation, clear approval from accountable managers, and ongoing monitoring — all of which reflect global risk management standards and IRM’s framework for embedding risk governance into organizational processes.

An FRMS is not a one-time compliance exercise; it is a living system that must evolve with operational data, integrate scientific insights, and improve through lessons learned. This continuous-improvement cycle is central to IRM’s approach: risk management is a dynamic capability that strengthens organizational resilience over time.

Implications for Airlines, Regulators, and Passengers

For airlines, implementing FRMS may require upfront investment in technology, training, and analytics.
However, the long-term benefits are substantial: fewer fatigue-related incidents, more resilient operations,
and enhanced stakeholder trust.
For regulators, FRMS represents a move toward performance-based oversight — encouraging innovation
and accountability rather than relying solely on prescriptive rules.
For passengers, it offers reassurance that their flight crew are well-rested and supported by scientifically
validated safety systems.

Aviation’s Journey Toward Risk Intelligence
India’s aviation industry is one of the fastest-growing globally, bringing both opportunity and complexity. The introduction of FRMS marks a step toward a risk-intelligent aviation ecosystem, where safety decisions are informed by data, foresight, and governance rather than simple rule adherence. This evolution mirrors trends in other industries, where organizations are embedding ERM into their strategies — not to eliminate risk, but to manage it intelligently, protect stakeholders, and create sustainable value.

Lessons for Every Sector
The DGCA’s FRMS guidelines offer more than a technical roadmap for airlines — they present a blueprint for modern risk governance. By aligning with IRM’s principles of Risk Culture, Risk Appetite, and Risk Management Standards, this initiative demonstrates how structured, enterprise-wide risk thinking can prevent incidents, strengthen resilience, and build public confidence.

Effective risk management is about making better-informed decisions under uncertainty. By institutionalizing FRMS, India’s aviation sector is not only enhancing flight safety but also modeling how other industries can embed ERM into their operations — turning risk from a compliance obligation into a source of strategic strength.

For professionals and students, the expanding scope of ERM means that developing risk management expertise can greatly enhance one’s ability to contribute to any industry. Regulators in India – from SEBI in finance to DGCA in aviation – are reinforcing the need for risk-resilient business environments and higher standards of governance. This has created demand for managers who not only understand their domain, but also understand how to integrate risk management into that domain. Educational initiatives are rising to meet this demand. For example, the National Institute of Securities Markets (NISM) and the Institute of Risk Management (IRM) India Affiliate, have jointly launched the Enterprise Risk and India Regulation Course (ERIRC), aimed at equipping professionals with a comprehensive understanding of ERM and regulatory compliance across sectors. Such courses cover key areas like risk policy, appetite, and culture, helping practitioners see the connections between, say, managing operational risks in an airline and complying with risk regulations in banking. By upskilling through structured ERM education, professionals. can better contribute to developing strong risk cultures in their organizations and drive risk- informed decision making.

Author:

Kosha Parekh, IRMCert, LLB

Director of Academics & Operations – IRM India Affiliate

The $2.78 Trillion Bond Market – Fuelling India’s Growth

Posted on September 8, 2025November 12, 2025 by Auburn Solutions

As India charts its course towards Viksit Bharat, by 2047, the sophistication and depth of its financial markets are paramount. In this journey, the Bond market is emerging from the shadows to take center stage. Once considered the exclusive domain of large institutions, it is now undergoing a profound transformation. The Indian Bond market has reached a significant milestone, expanding to approximately ₹238 lakh crores (US$ 2.78 trillion) as of March 31, 2025. As the Reserve Bank of India maintains a steady policy stance and encourages corporates to tap into capital markets, it is an opportune moment to analyze the forces propelling this expansion and the structural shifts reshaping our fixed-income landscape.

The Corporate Bond Market Progression

While the overall market demonstrated impressive growth, the Corporate Bond segment was a standout performer, acting as a powerful engine for this expansion. The Indian Corporate Bond market now stands at ₹53.64 lakh crores (US$ 627 billion), constituting 22.51% of the total bond market. This accelerated growth is not incidental; it is the result of progressive regulations by SEBI and a lot of other converging factors.i

- ‘Retailization’ through Online Bond Platforms (OBPPs): The emergence of SEBI-regulated Online Bond Platform Providers has been a game-changer. For decades, the corporate bond market was characterized by opacity, high minimum investment requirements, and information asymmetry, effectively barring retail participation. The introduction of OBPPs has dismantled these barriers and a retail investor can now invest starting at just ₹10,000. By enhancing transparency through real-time price discovery, simplifying access via user-friendly digital interfaces, and lowering investment thresholds, these platforms are accelerating the ‘retailization’ of corporate bonds, bringing a new and diverse investor base into the fold. This democratisation is fostering a more vibrant and liquid secondary market.
- A Favourable Macro Climate: The current macroeconomic environment has created a fertile ground for fixed-income investing. A moderating inflation trajectory and the widely anticipated cycle of declining interest rates have naturally shifted asset allocation preferences. Investors, facing persistent volatility in equity markets, are increasingly seeking the relative stability and predictable returns offered by Bonds. This is no longer just about capital preservation; it is a strategic move towards building a balanced portfolio. The demand for fixed-income securities has created strong momentum, which has been met by corporates eager to lock in funding at attractive rates.
- Capital Market Efficiencies for Corporate Issuers: We are observing a slower transmission of policy rate cuts within the traditional banking sector, as banks manage their net interest margins. This has made raising capital through the bond market a more lucrative and efficient proposition for corporates. The capital markets are far more responsive to policy signals, allowing well-rated companies to secure funding at more competitive rates and with greater speed than through conventional credit channels. This efficiency not only lowers the cost of capital for businesses, fuelling investment and expansion, but also reduces the concentration risk on the banking system.

Evolving Dynamics in Government Securities

India’s borrowing is shifting toward longer‑term bonds. The Centre has about ₹108 lakh crore of G‑Secs outstanding and states have around ₹63.15 lakh crore of State Development Loans (SDLs). Short‑term Treasury Bills are roughly ₹7.9 lakh crore. In plain terms, the government is locking in more long‑term money to cut refinancing risk and to fund projects that take years. The growth in SDLs shows states are using capital markets more directly, which builds accountability. For sizing the bond market, this means the long‑end investible universe is larger, trading in key benchmarks is improving, and the yield gap between Centre and states is now a central input when choosing bonds.

The Road Ahead

The outlook for the corporate bond market remains decidedly bullish. The core conditions that fueled last year’s growth are expected to persist. However, beyond these existing tailwinds, several future catalysts are poised to accelerate this growth trajectory even further.

The trend of retail participation shows no signs of slowing. According to a BSE report, the number of transactions in the retail segment grew by an exponential 327% last year, and this momentum has only accelerated in the current fiscal, a trend we have witnessed firsthand on our platform. This deepening of the market is crucial for its long-term health and vibrancy.

A pivotal moment for the Indian bond market will be its inclusion in major global bond indices. This development is expected to attract substantial passive inflows from foreign institutional investors, enhancing market liquidity and stability. More importantly, it will align our market infrastructure, trading practices, and regulatory standards with global best practices, further boosting international confidence.

Conclusion

In conclusion, the Indian bond market is in the midst of a profound structural evolution. It is transitioning from a wholesale-dominated market to a more inclusive and dynamic ecosystem. Driven by regulatory innovation, macroeconomic tailwinds, and the unstoppable force of retail participation, it is becoming a more transparent and accessible arena for both issuers and investors. The journey towards “a bond in every hand” is not just a slogan; it is a strategic imperative for building a resilient and self-sufficient economy. This transformation is well underway, strengthening India’s capital markets for a new era of growth and prosperity.

Author: Mr. Vishal Goenka, Co-Founder, IndiaBonds