NSE Indices Ltd, an NSE arm, on Friday said it has launched the country's first ever municipal bond index.
According to a release from NSE Indices, the new Nifty India Municipal Bond Index will monitor the performance of municipal bonds issued by Indian municipal corporations across maturities and with investment grade credit ratings.
The index was introduced at a workshop on municipal debt securities hosted by the Securities and Exchange Board of India (SEBI) in Bengaluru.
28 municipal bonds issued by 10 issuers, all of which have credit ratings in the AA category, are currently included in the index. Based on their outstanding balance, the weights of the index's constituents are assigned.
After the implementation of SEBI's Issue and Listing of Municipal Debt Securities Rules, 2015 and a renewed focus on municipal finance by policymakers, the Indian municipal bond market has experienced a rise in issuances.
Raising money from capital markets incentivises municipal corporations to fund new projects and improve civic infrastructure while encouraging them to become financially disciplined and governance oriented.
"The municipal bond market has a 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 utilised to finance the expansion of essential municipal services through growth-driven infrastructure projects and can contribute to bridging India's urban infrastructure financing gap," Mukesh Agarwal, CEO, NSE Indices, said.
The total return methodology, which includes price return and coupon return, is used to calculate the index. The index has a base value of 1,000 and a base date of January 1, 2021. Each quarter, the index will be reassessed.
With inputs from Agencies.
