43
Question 43
In India, which of the following can trade in
Corporate Bonds and Government Securities?
1. Insurance Companies
2. Pension Funds
3. Retail Investors
Select the correct answer using the code given below:
1. Insurance Companies
2. Pension Funds
3. Retail Investors
Select the correct answer using the code given below:
AOptions
A
A) 1 and 2 only
B
B) 2 and 3 only
C
C) 1 and 3 only
D
D) 1, 2 and 3
BSolution
All three categories of entities can trade in Corporate Bonds and Government Securities in India.
1. Insurance Companies: Insurance companies are significant institutional investors in India's debt markets. They invest a large portion of their policyholders' funds in stable, long-term instruments like corporate bonds and government securities to meet their long-term liabilities and regulatory requirements. They are major players in both primary and secondary debt markets.
2. Pension Funds: Pension funds (including the Employees' Provident Fund Organisation - EPFO, and those managed by the Pension Fund Regulatory and Development Authority - PFRDA) are also major institutional investors. Their mandate is to generate long-term returns for pensioners, and they heavily invest in debt instruments, including G-Secs and corporate bonds, which offer stability and regular income.
3. Retail Investors: While institutional investors dominate the debt markets, retail investors can also trade in both government securities and corporate bonds. For G-Secs, the RBI has introduced initiatives like the 'RBI Retail Direct' scheme to allow individual investors direct access to buy and sell G-Secs. For corporate bonds, retail investors can invest through specific platforms on stock exchanges or through bond funds/ETFs. It's important to note that direct participation might be lower due to minimum investment sizes or complexity, but the option to trade exists.
Therefore, all 1, 2, and 3 can trade in Corporate Bonds and Government Securities.
1. Insurance Companies: Insurance companies are significant institutional investors in India's debt markets. They invest a large portion of their policyholders' funds in stable, long-term instruments like corporate bonds and government securities to meet their long-term liabilities and regulatory requirements. They are major players in both primary and secondary debt markets.
2. Pension Funds: Pension funds (including the Employees' Provident Fund Organisation - EPFO, and those managed by the Pension Fund Regulatory and Development Authority - PFRDA) are also major institutional investors. Their mandate is to generate long-term returns for pensioners, and they heavily invest in debt instruments, including G-Secs and corporate bonds, which offer stability and regular income.
3. Retail Investors: While institutional investors dominate the debt markets, retail investors can also trade in both government securities and corporate bonds. For G-Secs, the RBI has introduced initiatives like the 'RBI Retail Direct' scheme to allow individual investors direct access to buy and sell G-Secs. For corporate bonds, retail investors can invest through specific platforms on stock exchanges or through bond funds/ETFs. It's important to note that direct participation might be lower due to minimum investment sizes or complexity, but the option to trade exists.
Therefore, all 1, 2, and 3 can trade in Corporate Bonds and Government Securities.
CStrategy
For questions on market participation, consider the broad categories of investors. Institutional investors (insurance, pension funds) are typically major players. For retail investors, remember that policies like 'RBI Retail Direct' aim to broaden participation in markets previously dominated by institutions.
DSyllabus Analysis
Economy: Financial Markets (Debt Market, Capital Market), Investment, Financial Institutions (Insurance, Pension Funds). Current Affairs: Financial Sector Reforms.
EQuestion Analysis
This is a factual question from Economics. While institutional participation is obvious, the inclusion of retail investors makes it trickier, but recent reforms have expanded their access to G-Secs and corporate bonds. Easy to Medium difficulty.