The
inflation indexed bonds are linked to WPI, which is significantly lower
than CPI. The retail investor is more interested in CPI and hence there is a
fundamental disconnect. The eventual returns are not expected to be
significantly better than existing options due to this - in fact it may be worse
off. Hence, the inflation adjusted return is just on paper as this is not
probably going to beat CPI even in future.
Also
retail investors are put off when the interest rate is not a fixed amount they
can expect ( the same problem with debt mutual funds due to which their
participation here is low ).
Taxability
aspect is not clear. If it is capital gains tax treatment, there is some
benefit to be derived there. Should it be like interest income and taxed, it’s
attraction diminishes further.
At
best, it is meant for conservative investors. Those who want to earn a
bit more would not come here. There are many better options out there.
Published in Moneycontrol.com ; Author - Suresh Sadagopan
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