Types of Securities in India: A Complete Guide

<p>When it comes to investing or borrowing, understanding the different types of securities in India is key. Securities are simply financial instruments that hold value and can be traded. Whether you're a new investor, someone looking to borrow against your investments, or simply exploring options, knowing your securities can help you make smarter money decisions.</p><br><p><strong>Need funds without selling your investments?</strong> <strong>You can get a loan against eligible securities like shares, mutual funds, and even bonds.&nbsp;</strong><a href=""https://www.bajajfinserv.in/loan-against-securities?sso-module=adp&dynamic-redirection=false&dynamic-redirection=false""><strong>Explore loan options now</strong></a></p><br><p>Let us now break down what securities are, the various types, and how they work in the Indian context.</p><br><h2><strong>What is security?</strong></h2><p>A security is a financial asset that can be traded or pledged. It represents a claim, ownership, or creditor relationship.</p><p>Here are the main characteristics of securities:</p><ul><li><strong>Tradable</strong>: Securities can be bought, sold, or exchanged in financial markets.</li><li><strong>Value-driven</strong>: Their prices are influenced by market demand and supply.</li><li><strong>Issued by entities</strong>: Governments, corporations, or institutions issue securities.</li><li><strong>Used for fundraising or investing</strong>: Companies use securities to raise capital, while individuals invest in them for returns.</li></ul><p>Securities are broadly categorised into debt, equity, derivatives, hybrid, and alternative instruments. Let's explore each.</p><br><h2><strong>Debt securities in India</strong></h2><p>Debt securities are instruments where you lend money to an entity (like the government or a company) in return for interest payments. These are considered lower-risk compared to equities.</p><p>Key highlights:</p><ul><li>Fixed income: You get regular interest payments.</li><li>Lower risk: Especially government-issued debt is considered very safe.</li><li>Tenure-based: Varies from a few days to decades.</li></ul><br><h2><strong>Government securities</strong></h2><p>Issued by the Reserve Bank of India on behalf of the Government of India, these are among the safest investment options.</p><ul><li>Examples include Treasury Bills (T-bills), Government of India Bonds, and State Development Loans.</li><li>They pay interest at fixed or floating rates.</li><li>Investors include individuals, banks, and institutions.</li></ul><table><tbody><tr><td><strong>Type</strong></td><td><strong>Maturity</strong></td><td><strong>Interest Type</strong></td><td><strong>Who Buys Them?</strong></td></tr><tr><td>Treasury Bills</td><td>Up to 364 days</td><td>Zero-coupon</td><td>Retail investors, banks</td></tr><tr><td>Government Bonds</td><td>5-40 years</td><td>Fixed/floating</td><td>Institutions, HNIs, public</td></tr><tr><td>SDLs (State Loans)</td><td>10-30 years</td><td>Fixed</td><td>Investors seeking steady returns</td></tr></tbody></table><br><h2><strong>Corporate bonds and debentures</strong></h2><p>These are issued by companies to raise capital. They generally offer higher returns than government securities but come with higher risk.</p><ul><li>Corporate bonds are structured debt with interest payouts.</li><li>Debentures are unsecured but may offer attractive interest.</li><li>Ratings (AAA to junk) indicate creditworthiness.</li><li>Ideal for medium to long-term investors.</li></ul><br><h2><strong>Money market instruments (T-bills, CMBs, CDs)</strong></h2><p>These are short-term debt instruments with high liquidity.</p><ul><li><strong>T-bills</strong>: Issued by the government; zero-coupon and short maturity.</li><li><strong>Cash Management Bills (CMBs)</strong>: Like T-bills but for ultra-short terms.</li><li><strong>Certificates of Deposit (CDs)</strong>: Issued by banks; offer fixed interest.</li></ul><table><tbody><tr><td>Instrument</td><td>Maturity</td><td>Issuer</td><td>Risk Level</td><td>Return Type</td></tr><tr><td>T-bills</td><td>< 1 year</td><td>Government</td><td>Very Low</td><td>No interest, discounted price</td></tr><tr><td>CMBs</td><td>< 91 days</td><td>Government</td><td>Very Low</td><td>Short-term yield</td></tr><tr><td>CDs</td><td>7 days-1 year</td><td>Banks</td><td>Low</td><td>Fixed interest</td></tr></tbody></table><br><h2><strong>Equity securities in India</strong></h2><p>Equity securities represent ownership in a company. Investors buy shares hoping the company performs well so their share value increases.</p><p>Main features:</p><ul><li>Ownership: You become a part-owner.</li><li>Returns: Earn via dividends and capital gains.</li><li>Riskier: Market performance directly affects value.</li></ul><p>They can be traded in stock markets and are ideal for long-term wealth creation.</p><br><h2><strong>Common vs preferred shares</strong></h2><h3><strong>Common shares</strong>:</h3><ul><li>Voting rights</li><li>Variable dividends</li><li>Higher growth potential</li></ul><h3><strong>Preferred shares</strong>:</h3><ul><li>No/limited voting rights</li><li>Fixed dividends</li><li>Priority over common shares in payouts</li></ul><br><p><strong>Looking to unlock liquidity without selling your shares?</strong> <strong>You can avail of a loan against shares at competitive rates.&nbsp;</strong><a href=""https://www.bajajfinserv.in/loan-against-shares""><strong>Click</strong></a><strong> to know more.</strong></p><br><h2><strong>Derivative securities</strong></h2><p>Derivatives derive their value from an underlying asset like a stock, bond, index, or commodity.</p><p>They are commonly used for hedging or speculation.</p><p><strong>Common examples include:</strong></p><ul><li>Futures contracts: Agreement to buy/sell at a future date at a fixed price.</li><li>Options: Right (not obligation) to buy/sell an asset.</li><li>Swaps: Exchange of cash flows (like interest rate swaps).</li></ul><br><h2><strong>Futures, options, swap contracts</strong></h2><ul><li><strong>Futures</strong>: Used by traders to hedge or speculate. E.g.: Farmer locks the price of wheat for delivery.</li><li><strong>Options</strong>: Buy a right to purchase shares at a specific price. E.g.: Investor expects price to rise.</li><li><strong>Swaps</strong>: Companies exchange fixed for floating interest payments. E.g., Corporate hedges loan interest.</li></ul><br><h2><strong>Hybrid securities</strong></h2><p>Hybrid securities combine features of debt and equity. They offer regular income like bonds but may also convert into shares.</p><p>Useful for investors seeking a balance of safety and growth.</p><br><h2><strong>Convertibles, structured products</strong></h2><ul><li><strong>Convertible debentures</strong>: Start as debt, convert to equity.</li><li><strong>Preference shares</strong>: Fixed dividends, sometimes convertible.</li><li><strong>Structured products</strong>: Customised investment options linked to market indices, interest rates, or a mix.</li></ul><br><h2><strong>Alternative and social instruments</strong></h2><p>These are less traditional, often used for diversification or global exposure.</p><p>They include:</p><ul><li>Instruments listed overseas or tracking foreign assets.</li><li>Socially impactful investments.</li></ul><br><h2><strong>ADRs/GDRs, IDRs, participatory notes</strong></h2><ul><li><strong>ADRs/GDRs</strong>: Indian companies list abroad to raise capital.</li><li><strong>IDRs</strong>: Foreign companies listed on Indian exchanges.</li><li><strong>P-notes</strong>: Offshore investments in Indian markets by foreign investors.</li></ul><p>These help global investors participate in Indian growth without direct registration.</p><br><h2><strong>Sovereign Gold Bonds, Gold ETFs, Commodity ETFs</strong></h2><p>Gold-linked investments are gaining popularity.</p><table><tbody><tr><td><strong>Instrument</strong></td><td><strong>Backed by</strong></td><td><strong>Return type</strong></td><td><strong>Liquidity</strong></td></tr><tr><td>Sovereign Gold Bonds</td><td>Government</td><td>Interest + gold price</td><td>Tradable on exchanges</td></tr><tr><td>Gold ETFs</td><td>Physical Gold</td><td>Market-linked</td><td>Highly liquid</td></tr><tr><td>Commodity ETFs</td><td>Commodities</td><td>Market-linked</td><td>Moderate</td></tr></tbody></table><p><strong>Need funds against your Sovereign Gold Bonds?</strong> <strong>You do not need to sell them.&nbsp;</strong><a href=""https://www.bajajfinserv.in/loan-against-securities""><strong>Explore loan options here</strong></a></p><br><h2><strong>Distressed securities and special cases</strong></h2><p>These include:</p><ul><li>Bonds of companies nearing default or bankruptcy.</li><li>Reconstructed debt traded at deep discounts.</li><li>Ideal for high-risk investors seeking turnaround opportunities.</li></ul><p>They require careful analysis and are not suited for beginners.</p><br><h2><strong>ESG and Green bonds / Sustainable debt</strong></h2><p>These are issued to fund environmentally or socially responsible projects.</p><p>Examples include:</p><ul><li>Renewable energy bonds</li><li>Social welfare and affordable housing bonds</li><li>Green infrastructure debt</li></ul><p>Investing in these aligns your money with positive impact goals while still earning returns.</p>

Investing in Indian securities is easier than ever. Here is a step-by-step checklist to get started:

Steps to invest:

• Open a Demat and trading account with a SEBI-registered broker
• Complete KYC (PAN, Aadhaar, bank details)
• Choose your investment product (stocks, bonds, mutual funds, etc.)
• Use online platforms or apps to place orders
• Track performance regularly

Checklist:

• Valid PAN and Aadhaar card
• Registered mobile number and email ID
• Linked bank account
• Understanding of your risk appetite
• Select reliable and regulated platforms

Regulatory framework and SEBI guidelines

The Indian securities market is governed by SEBI (Securities and Exchange Board of India), which protects investor interest and ensures fair practices.

Key points:

• SEBI regulates stock exchanges, brokers, mutual funds, and listed companies
• It ensures transparency and fair pricing in markets
• Sets guidelines for issuing and trading securities
• Oversees investor grievance redressal
• Regulates loans against securities and margin trading practices

Conclusion

India offers a rich landscape of securities from government bonds and equity shares to gold ETFs and green bonds. Each type serves a unique purpose and carries its own risk-return profile. Understanding the types of securities in India helps you pick the right options for your financial goals, whether you are investing for growth, earning passive income, or seeking urgent liquidity.

Need liquidity without selling your investments? You can easily avail a loan against mutual funds, shares, or bonds. Apply now