NSE Indices launches India’s first Municipal Bond Index

The Nifty India Municipal Bond Index will track the performance of Indian municipal bond market.

NSE’s index services subsidiary, NSE Indices Limited, on February 24 launched India’s first-ever Municipal Bond Index, Nifty India Municipal Bond Index at a SEBI workshop on Municipal Debt Securities in Bengaluru.

The Nifty India Municipal Bond Index tracks the performance of municipal bonds issued by Indian municipal corporations across maturities and having investment-grade credit rating. The index includes municipal bonds issued as per the Securities Exchange Board of India Issue and Listing of Municipal Debt Securities Regulations, 2015. Presently, the index has 28 municipal bonds issued by 10 issuers all having credit rating in the AA rating category. The index constituents are assigned weights based on their outstanding amount.

Indian municipal bond market has seen a resurgence of issuances after the SEBI Issue and Listing of Municipal Debt Securities Regulations, 2015 came into effect and a renewed emphasis on municipal finance by policymakers. Raising money from capital markets incentivizes municipal corporations to fund new projects and improve civic infrastructure while encouraging them to become financially disciplined and governance oriented.

Also read: NSE gets the final Sebi approval to launch Social Stock Exchange

“The municipal bond market has the potential to play a pivotal role in financing the borrowing requirements of different municipal corporations in India. The proceeds from bonds issued by municipal corporations can be utilized to finance the expansion of essential municipal services through growth-driven infrastructure projects & can contribute to bridging India’s urban infrastructure financing gap. The launch of the Nifty India Municipal Bond Index - India’s first-ever Municipal Bond Index aligns with NSE’s vision to provide market-representative benchmarks," said the CEO of NSE Indices Mukesh Agarwal.

The Nifty India Municipal Bond Index will track the performance of Indian municipal bond market and act as a benchmark for passive funds which will provide more investment choices to Indian fixed-income investors. The index is computed using the total return methodology including price return and coupon return. The index has a base date of January 1, 2021, and a base value of 1000. The index will be reviewed quarterly. The index is expected to act as a benchmark for asset managers and be a reference index tracked by passive funds in the form of Exchange Traded Funds (ETFs), index funds and structured products.