Corporate bond market needs wider participation to improve liquidity: ANMI chief

The corporate bond market needs wider participation and greater awareness among retail investors to improve liquidity and price discovery, a brokers' association president said on Thursday. Kamlesh Shroff, President of the Association of NSE Members of India (ANMI), said the equity investment culture in India has developed significantly over the past three decades, while the debt market has been slower to gain traction among investors. He said greater awareness about the availability of corporate bond products and the volumes being generated in the market would gradually encourage retail investors to participate.

“Predominantly, the equity cult in our market is far more superior and has built up in the last three decades. The debt market has been very slow in picking it up,” Shroff said, adding that increased awareness would slowly and steadily bring the retail market into the segment. On liquidity in the corporate bond market, Shroff said greater market breadth would be crucial for improving liquidity and ensuring better price discovery. “If you have liquidity, it is when you have a proper market.

So, if you don’t have liquidity, your downside is then your prices, price discovery comes into play,” he said. He added that higher participation and breadth would lead to better liquidity, which in turn would help improve price discovery. Commenting on the cash market and price discovery, Shroff said increasing the breadth and depth of the market would allow more orders to enter the system and improve the overall matching process.

“The market will get a larger breadth and depth. So, when those 320 trades get into orders, go into the system, it will have a larger depth from that perspective. The matching will also have a better price discovery,” he said. Shroff also welcomed the proposed role of fixed income channel partners, saying they could play an important role in creating awareness and advising investors across the country.

“They are the ones who can actually advise, create awareness to all the people across all the pin codes. So, it’s a good system and a way forward,” he said. On the role of riskometers in corporate bonds, Shroff said investors have different risk appetites and such mechanisms can help them understand the risk associated with different instruments.

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