In an exclusive interaction with Kshitij Anand of ETMarkets, Saurav Ghosh, Co-founder of Jiraaf, explains why blue-chip corporate bonds deserve a place in every portfolio, how investors can assess their creditworthiness, and why 2025 could be a defining year for fixed-income investing. Edited Excerpts –
Q) What are AAA Bonds? And, who assigns the rating?
AAA bonds are corporate bonds that carry the highest possible credit rating, reflecting the issuer’s strong financial health and extremely low probability of default.
In India, these ratings are assigned by SEBI-registered credit rating agencies, including CRISIL, ICRA, CARE Ratings, and India Ratings.
A AAA rating indicates that the issuer has a robust balance sheet, stable cash flows, and a proven record of timely debt repayment.
Q) What factors make blue-chip corporate bonds an attractive addition to investment portfolios in 2025?
In 2025, blue-chip corporate bonds have emerged as a smart addition to portfolios due to their combination of high credit quality, stable returns, and reduced volatility.
With India’s growth cycle gaining strength and inflation in check, investors are seeking predictable income streams that outperform fixed deposits.
Bonds from trusted issuers, rated AAA to BBB, deliver 8%–15% returns outperforming FDs while maintaining stability and predictable cash flows across varying risk levels.
Q) How does the current interest rate environment in India influence the appeal of these bonds?
The Reserve Bank of India’s neutral policy stance has led to bond yields stabilizing in India as markets price in the stable interest rate environment.
This environment makes AAA and other investment-grade corporate bonds particularly appealing, as investors can lock in attractive yields in case India sees more rate cuts in the coming months.
As interest rates eventually soften, existing bonds with higher coupons stand to gain in value, offering investors both regular income and potential capital appreciation.
Q) Things to check before investing in AAA bonds?
A) Before investing in AAA bonds, investors should carefully evaluate a few key parameters. It’s important to review the credit rating and the issuer’s track record to ensure financial stability and reliability.
The tenor and yield should align with one’s investment horizon, while the coupon payment frequency must be considered for maintaining predictable cash flows.
Additionally, investors should be mindful of the tax implications, as the interest income from these bonds is taxable as per the investor’s income slab.
To further enhance safety and transparency, investors are encouraged to use platforms registered under SEBI’s Online Bond Platform Providers (OBPP) framework, which ensure regulated and secure bond transactions for retail participants.
Q) Could you elaborate on the historical default rates for AAA-rated bonds and what they indicate about the stability of these investments?
Historically, AAA-rated bonds have displayed near-zero default rates in India.
According to CRISIL data, the 10-year cumulative default rate for an AAA-rated instrument is near 0. In fact, the default rates in the investment-grade segment (rated AAA to BBB) are relatively low.
The riskiest investment-grade bonds, that is, BBB-rated bonds, also have a conservative default rate of only 2.49%.
The low default rates underscore the stability and reliability of investment-grade bonds, making them one of the safest fixed-income avenues available for investors seeking predictable returns with minimal risk.
Agencies(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
