Growth And Liquidity In Indian Bond Markets: Insights From Harmoney’s Fixed-Income Innovation 2025
With the bond market set to double every five years, efficiency and liquidity will be key to sustaining this growth. Yet, the industry still relies on traditional processes that can hinder progress.
As fixed-income markets evolve, embracing innovation and technology will be crucial to unlocking new opportunities.
To drive this conversation forward, Harmoney hosted its inaugural Fixed Income Innovation Forum, bringing industry leaders together to explore the future of fixed-income trading.
A panel discussion at the event focused on how market participants, evolving regulations, and technological innovations contribute to liquidity and addressed the challenges of quasi-telephone market structures. This discussion was crucial as it explored key reforms needed to drive efficiency and market participation.
Moderated by Mr. Manoj Rane, Advisor, Harmoney, the panel featured Mr. Venkat Nageswar, CEO, AMFI; Mr. Amit Tripathi, CIO, Nippon India Mutual Fund; and Mr. Rohit Mandhotra, Head of Investor Relationships, NSE.
Here are the key takeaways from the session:
- Low liquidity challenges stem from inconsistent valuations
The panel highlighted that low liquidity stems from the inconsistent valuation of corporate bonds across institutions, the dominance of buy-and-hold investors in the market, and limited incentives for market making and trading.
As Mr. Amit Tripathi noted, valuation forces transparency, and transparency will help mend systemic gaps. He further emphasized developing a robust repo market for liquidity and trading incentives.
- Bond markets need to adapt to electronic trading to move forward
Unlike the automated equity market, the corporate bond market still operates on telephones. Moving towards electronic trading can improve transparency and liquidity. To facilitate electronic trading, anonymity and credit concerns need to be addressed.
- Corporate bonds can be challenging to homogenize
Compared to government bonds, corporate bonds have different risk profiles, security structures, and market participants. These differences make it challenging to homogenize the corporate bond market.
- Markets need speculators to grow
Mr. Venkat Nageswar highlighted the importance of speculation for price discovery and the market’s growth, noting, “While we need a common value, we need speculators to come up who can take a view and then give direction to this.”
Conclusion
Harmoney's Fixed-Income Innovation Forum 2025 sparked crucial discussions on the future of fixed-income markets in the industry.
The industry leaders shed light on challenges pertaining to traditional fixed-income markets, explored key challenges to liquidity, and shared their expert insights into improving the market.
The conversations in this panel underscored that unlocking growth opportunities in the bond market will require structural reforms, such as digitization and incentive shifts, to enhance efficiency in a fragmented market.
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