NSE Indices Ltd., an NSE arm, on Friday said it has introduced the country’s first ever municipal bond index.
The new Nifty India Municipal Bond Index will track the performance of municipal bonds issued by Indian municipal corporations across maturities and having investment grade credit rating, NSE Indices said in a statement.
The index was launched at a Securities and Exchange Board of India (SEBI) workshop on Municipal Debt Securities in Bengaluru.
Presently, the index has 28 municipal bonds issued by 10 issuers all having credit rating in the AA category. The index constituents are assigned weights based on their outstanding amount.
The Indian municipal bond market has seen a resurgence of issuances after SEBI’s 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 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 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 1,000. The index will be reviewed quarterly.