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Business News/ Money / Personal Finance/  SGB 2015-I series set for redemption on November 30 with 128% profit on investment; all you need to know

SGB 2015-I series set for redemption on November 30 with 128% profit on investment; all you need to know

The Reserve Bank of India (RBI) has announced the redemption value for the first series of Sovereign Gold Bonds (SGBs), which is scheduled for redemption on November 30. The SGB 2015-1 series garnered investments of ₹245 crore.

The SGB 2015-I series, launched in 2015, is scheduled for redemption on November 30 this year.Premium
The SGB 2015-I series, launched in 2015, is scheduled for redemption on November 30 this year.

The Reserve Bank of India (RBI) has officially announced the ultimate redemption value for the first series of the Sovereign Gold Bonds (SGBs). The SGB 2015-I series, launched in 2015, is scheduled for redemption on November 30 this year. The inaugural issuance of these bonds garnered investments amounting to 245 crore, as per the information disclosed by the country’s Central Bank.

Though the inherent lock-in period in these bonds is five years, these bonds are slated to mature after eight years of the issue date. Hence, it is essential to analyse the returns of these bonds to gauge their appeal as an investment choice. Here is a detailed overview of the returns provided by SGB 2015-I:

Offer Price: 2,684 per gram

Redemption Value: 6,132 per gram

Profit on Investment: 128% ( 3,448)

Annualized Gain: 11.7%

These statistics underscore the remarkable returns produced by SGB 2015-I during its eight-year term. The redemption price surpasses the issue price significantly, signifying substantial capital appreciation. The relatively nominal issue price was a result of the comparatively stable gold prices during that period. Furthermore, the annualized yield of 11.7 per cent is notably appealing when contrasted with alternative investment choices over the corresponding timeframe.

The blend of consistent interest payments and the prospect of gold price appreciation render SGBs an enticing investment avenue for individuals in search of a mix of steady income and capital growth. The fixed interest rate of 2.5 per cent ensures a reliable income stream, while the potential for gold price appreciation presents the chance for capital profits. This combination may be particularly attractive to risk-averse investors aiming for a harmonious equilibrium between stability and growth potential.

The robust performance of SGB 2015-I can be ascribed to various factors:

  • Increase in gold prices: Gold prices have consistently moved upward over the years, playing a role in the escalation of the redemption value of SGBs.
  • Government backing: SGBs benefit from the sovereign guarantee of the Indian government, providing investors with a reassuring sense of security and stability.
  • Inflation safeguard: Gold, as a class of asset, is frequently regarded as a hedge against inflation, positioning SGBs as a practical choice to preserve wealth in an inflationary setting.

Moreover, SGBs present the distinctive benefit of being expressed in grams of gold. Consequently, the redemption worth of the bond is directly tied to the prevailing gold price, furnishing investors with a safeguard against inflation. Given that gold prices typically ascend in tandem with inflation, SGBs can serve as a means to preserve the purchasing power of investors’ savings.

The amalgamation of fixed interest payments, the possibility of gold price appreciation, tax advantages, and protection against inflation collectively positions SGBs as a compelling investment choice suitable for a diverse spectrum of investors. 

However, Basavaraj Tonagatti, a SEBI-registered investment advisor and founder, Basu Nivesh views SGB investments differently. He shared, “Numerous individuals are celebrating the impressive gains derived from the first tranche of SGBs. Nevertheless, it’s crucial to bear in mind that these returns stem from the inherent value of gold, not the product itself. Despite gold serving as an asset class with a negative correlation to equities, it remains inherently volatile."

"Historical data indicates that even after holding gold for over eight years, the returns might fall short of those obtained from a conventional bank savings account. Thus, it’s essential to recognize that past performance doesn’t guarantee future results. Assess your asset allocation carefully, and in my opinion, consider SGB investments primarily if there’s a genuine need for physical gold in your future plans," he added. 

The remarkable performance of SGB 2015-I throughout the last eight years has strengthened confidence in gold’s capacity to serve as a secure investment during times of economic uncertainty and volatility. The substantial returns produced by these bonds, combined with their tax-exempt status, have firmly established the appeal of SGBs as an investment avenue.

However, the contentment stemming from the attained returns doesn’t automatically label gold as an inherently appealing investment choice. In retrospect, there has been a significant fluctuation in gold prices in just the past year. 

In comparison, the Sensex has demonstrated a notably higher growth rate of around 12 per cent over the corresponding period, thus, prompting investors to decide how much part of their earnings must be allocated to gold investments. 

Yet, emerging investors typically limit their analysis to return comparisons when making investment decisions. As they explore tactics to navigate the intricacies of the present economic terrain, SGBs are poised to assume a more prominent role in their investment portfolios.


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Published: 30 Nov 2023, 02:18 PM IST
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