About Market-Linked Debentures (MLDs)
Market-Linked Debentures (MLDs) are non-convertible debentures (NCDs) whose returns are linked to the performance of specific market indices (e.g., NIFTY 50) or other benchmarks such as government securities or interest rates.
Return
- MLDs offer returns that are based on predefined conditions linked to market performance.
- It has potential to give higher return as compared to fixed deposits or regular bonds.
- Some MLD’s offer minimum guaranteed return and higher return if market condition as per terms of issue is met.
Risk
- Principal Protection: Most MLDs are structured to protect the initial capital investment.
MLDs are generally considered safe for principal protection, but the safety depends on the creditworthiness of the issuer and the specific terms of the MLD.
- MLD’s are regulated by SEBI.
- Customized Returns: Returns are linked to specific benchmarks or indices.
Liquidity
- MLDs have a fixed maturity period, usually ranging from 1 to 5 years.
- MLDs are not actively traded in secondary markets, making them difficult to sell before maturity.
- MLDs are not as liquid as stocks or mutual funds.
Who should invest in MLD's ?
- Investors seeking capital protection with the potential for higher returns than traditional fixed-income instruments.
- Investors with a moderate to low risk appetite but who are willing to accept some variability in returns.