Government Securities (G-Secs) offer stable, long-term returns backed by the Government of India. However, the actual value of your investment over time depends on factors like interest rates, holding period, and market conditions.
How G-Sec investments work?
- Fixed returns: You receive regular interest (called 'coupon') over the life of the G-Sec.
- Principal return: Your initial investment is returned at maturity.
- Market price fluctuations: If sold before maturity, the value may vary depending on prevailing interest rates.
Example
Suppose you purchase a G-Sec at ₹100 with:
- Coupon rate: 7%
- Tenure: 10 years
You will receive ₹7 annually for 10 years, totaling ₹70, plus ₹100 principal at the end.
Now imagine market interest rates increase to 8% after 5 years. The market price of your G-Sec might drop to ₹95. If you sell mid-way, you'd incur a loss of ₹5. However, if you hold till maturity, you still receive the full ₹100 and ₹70 interest.
What if...
| Scenario | Resolution |
|---|
| You sell before maturity when interest rates have risen | You may receive less than your purchase price. |
| You hold till maturity | You will receive full principal and accrued interest as per the coupon rate. |
To maximise returns, it's best to hold G-Secs till maturity, especially in a rising interest rate environment.
Last updated: 26 Jun 2025
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