India’s first municipal bond index- IBMX

About municipal bond index- 

• The new Nifty India Municipal Bond Index will track the performance of municipal bonds issued by Indian municipal corporations across maturities and having investment grade credit rating.
• Presently, the index has 28 municipal bonds issued by 10 issuers all having credit rating in the AA category. 
• The index constituents are assigned weights based on their outstanding amount.
• The Indian municipal bond market has seen a resurgence of issuances after Sebi’s Issue and Listing of Municipal Debt Securities Regulations, 2015 came into effect and a renewed emphasis on municipal finance by policymakers.
• Raising money from capital markets incentivises municipal corporations to fund new projects and improve civic infrastructure while encouraging them to become financially disciplined and governance oriented.
• 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.
• The index 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. The index will be reviewed quarterly.

What is a Municipal bond?

• Municipal bonds  are  a  good  alternative  source  of  finance  to  fund  projects  undertaken  by Municipal Corporations. 
• In other words, a municipal bond is a debt security issued by a state, municipality or county to finance its capital expenditures, including the construction of highways, bridges or schools.

Note: 

• NSE Indices Limited, a subsidiary of NSE, provides a variety of indices and index-related services for the capital markets. 
• The company focuses on the index as a core product. 
• The company owns and manages a portfolio of indices under the Nifty brand of NSE, including the flagship index, the NIFTY 50. 
• NSE Indices also maintains fixed income indices based on Government of India securities, corporate bonds, money market instruments and hybrid indices.