Edelweiss AMC to launch India's first bond ETF this year. All you need to know

Edelweiss AMC's CEO Radhika Gupta gave a lowdown on bond ETFs in an interview with CNBC-TV18.

Gupta said: “Bond ETFs were actually created for retail investors in the Indian context. Bond ETFs have a theme, it could be government-owned companies, it could be companies with two-year maturity, any theme, there is a bond index and then the bond ETF follows that Index.

"One of the big differences, however, what investors in India have seen is they have seen bond mutual funds, they have never seen ETFs. ETFs trade on the exchange like any other ETF and a bond ETF is no different.”

She added: “In the context of a bond ETF, bond markets themselves are not very transparent. An investor as we have learned over the last few years does not know how to judge what is a good quality bond and what is not a good quality bond. In fact, the process of buying and selling a bond, unlike buying and selling a stock, is very difficult for a retail investor.

"In a bond ETF you solve these problems, because in Rs 5,000 or Rs 1,000 you are getting a basket of good quality bonds. The portfolio of the bond is visible on an independent website everyday something that you can’t get in a regular bond mutual fund and if you choose to enter and exit the bond you can do so every day on the exchange live, just like you can with the stock.”

She continued: “One of the big objectives of launching this product was to deepen liquidity in the bond markets and hence the infrastructure has been put in place to make sure that the product is liquid in trading in the market, otherwise it has no edge over a bond mutual.”