The broader has remained under pressure over the last year amid geopolitical circumstances. The Nifty 50 fell by 3.87%, while the broader Nifty 500 universe has given a marginal 1.42% return as of 7 September, according to Screener data.
Individual traders have also faced losses in equity derivatives.
According to a SEBI study, aggregate net losses declined 18% to ₹91,685 crore in FY26 from ₹1.12 lakh crore in FY25. However, the average loss per person increased 2% YoY to ₹1.17 lakh in FY26, indicating that while fewer individuals traded, those who did lost more on average.
Against this backdrop, have risen in India and globally. Bloomberg data shows the India 10-year government bond yield at 6.96%, up 47 basis points over the last 1 year. Japan’s 10-year yield is at 2.90%, up 134 basis points, while the US 10-year yield is around 4.78%, up 71 basis points.
Here’s what rising bond yields mean for retail investors in India.
Are bonds more attractive now for retail investors?
Imran Khan, Director, EquiRize Securities, explained that “the relative attractiveness of fixed income has improved meaningfully over the last year. A higher bond yield provides a better starting point for future returns, but bond prices can still fall if yields rise further”.
The 10-year Indian government bond yield is now around 6.96%, close to the psychologically important 7% level, he noted.
According to him, the last one year has changed the equation in three ways:
- Starting yields are more attractive.
- Global interest rates are structurally higher than they were during the ultra-low-rate period.
- The opportunity cost of holding only equities has increased.
Should investors buy bonds now or wait?
Khan said, “Waiting for the perfect yield can be as difficult as timing the equity market. The current 10-year G-sec yield is around 6.96% after rising for three consecutive weeks, with the market pricing in concerns around inflation, crude oil, global yields and the possibility of higher rates”.
He suggested staggered deployment rather than an all-or-nothing approach.
For an investor allocating ₹10 lakh to fixed income, Khan suggested deploying 30–40% now, another 30–35% if yields move higher, and the balance once there is greater visibility on inflation and RBI policy. This can reduce interest-rate timing risk.
Investors should also distinguish between buying a bond to maturity and buying one for capital appreciation. If a bond may need to be sold before maturity, duration becomes important. A long-duration bond can suffer substantial mark-to-market losses if yields rise further, he added.
How should investors allocate between bonds and equity now?
Khan said a reasonable allocation for a moderate-risk investor could be:
- Equity: 45–60% for long-term wealth creation
- FD/very short-term debt: 15–25% for liquidity and capital stability
- Bonds/high-quality debt: 20–30% for income and diversification
should not be viewed as an alternative to equity for wealth creation, but as a portfolio stabiliser and income-generating component, Khan said. Within fixed income, investors should not put everything into corporate bonds simply because the coupon is higher.
G-Secs, corporate bonds or debt funds: Which one should an investor choose?
Khan explained that investors can use all three selectively depending on their objective.
- For credit safety, G-Secs, Treasury Bills and high-quality government-backed securities should form the core of fixed-income allocations.
- AAA/AA+ corporate bonds can offer additional yield over G-Secs for investors comfortable with credit and liquidity risk. He favours high-quality, short-to-medium-duration bonds over long-duration or low-rated bonds.
- Debt funds suit investors who prefer not to analyse individual bonds, but credit-risk funds warrant caution given their higher credit risk.
What should investors check before buying bonds?
“For most retail investors, the best approach is quality first and yield second,” he said. For the current environment, Khan shared three key checks:
- Interest-rate risk: If global and Indian yields continue rising, bond prices can fall.
- Credit risk: The temptation to chase 9–11% yields can push investors into lower-rated issuers where the additional yield may not adequately compensate for default risk.
- Liquidity risk: Unlike an FD, a corporate bond may not always be easily sold at a fair price.