India’s first ever municipal bond index has been unveiled by the National Stock Exchange (NSE). The India Municipal Bond Index (IBMX) will track the performance of bonds issued by Indian Municipal Corporations. There is a thriving municipal bond market in India that has seen a three-fold rise in fund raising since 2017. Last year, fundraising through Municipal Bonds stood at ₹6,252 crore through this route compared to ₹2,342 crore in 2017.
NSE’s bond index will have 28 municipal bonds, which were issued by 10 issuers, as its constituents. The bonds in the index have a credit rating of AA category. The index constituents are assigned weight in the index in accordance with their outstanding amount.
The index, which will be reviewed quarterly, 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, NSE said.
The Indian municipal bond market shows a push when the SEBI’s Issue and Listing of Municipal Debt Securities Regulations, 2015 came into effect. The raised money helps municipal corporations fund new projects and in turn improve civic infrastructure. It also encourages them to become financially disciplined and governance-oriented.
Mukesh Agarwal, CEO, NSE Indices, said, “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.”