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The first SGB issued in Nov 2015 has given 128% return in 8 years. Is that good or bad?

The 2015 Series I SGB showcased a notable return on maturity compared to other investment avenues like fixed deposits and certain equity mutual funds.

The first SGB issued in Nov 2015 has given 128% return in 8 years. Is that good or bad?


Posted on 26 Nov 2023
Author: Sayan Sircar
14 mins read
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The 2015 Series I SGB showcased a notable return on maturity compared to other investment avenues like fixed deposits and certain equity mutual funds.

The first SGB issued in Nov 2015 has given 128% return in 8 years. Is that good or bad?

This article is a part of our detailed article series on the new issues of Sovereign Gold Bond (SGB) as well as maturity of existing SGBs. Ensure you have read the other parts here:

📚 Topics covered:

Which SGB series we are discussing here?

SGB Nov 2015 Maturity Press Release

This is the first SGB that was ever issued way back in November 2015.

Series 2015 Series I SGBNOV23
Issue date 26-Nov-15
ISIN IN0020150085
Issue Price ₹ 2,684
Interest 2.75%
Maturity date 30-Nov-23
Maturity price ₹ 6,132 (tax-free) (source)
Headline return 128%
Gold price return 10.88%
Rupee fall vs USD 25.23%
Total interest received ₹ 590.48 (taxed at slab)
XIRR (no tax on interest) 12.90%
XIRR (30% tax on interest) 12.28%

The SGB has given a return higher than the gold price due to the interest paid every six months.

Related:
Frequently asked questions on Sovereign Gold Bonds (SGB): the complete guide

How much return did this SGB give?

If you had bought and held this SGB until maturity, then this is the return you would have got based on the amounts you paid, the intermediate interest you got and the final maturity value:

Date Description No tax 10% tax 20% tax 30% tax
Nov-15 Investment -2,684 -2,684 -2,684 -2,684
May-16 6-m interest 1 36.91 33.21 29.52 25.83
Nov-16 6-m interest 2 36.91 33.21 29.52 25.83
May-17 6-m interest 3 36.91 33.21 29.52 25.83
Nov-17 6-m interest 4 36.91 33.21 29.52 25.83
May-18 6-m interest 5 36.91 33.21 29.52 25.83
Nov-18 6-m interest 6 36.91 33.21 29.52 25.83
May-19 6-m interest 7 36.91 33.21 29.52 25.83
Nov-19 6-m interest 8 36.91 33.21 29.52 25.83
May-20 6-m interest 9 36.91 33.21 29.52 25.83
Nov-20 6-m interest 10 36.91 33.21 29.52 25.83
May-21 6-m interest 11 36.91 33.21 29.52 25.83
Nov-21 6-m interest 12 36.91 33.21 29.52 25.83
Jun-22 6-m interest 13 36.91 33.21 29.52 25.83
Dec-22 6-m interest 14 36.91 33.21 29.52 25.83
Jun-23 6-m interest 15 36.91 33.21 29.52 25.83
Nov-23 Maturity 6,168.91 6,165.21 6,161.52 6,157.83
30-Nov-2023 XIRR 12.90% 12.70% 12.49% 12.28%

It is important to note that to get the return in the table above, which is a calculation similar to that of Yield To Maturity or YTM of a bond, the intermediate 6-monthly interest payments must be also invested in SGB, if needed from the secondary market: How to buy SGB from the stock market?.

Simply adding the gold price return with the interest rate will not give the return of the SGB since the interest also has to compound at the same rate.

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Comparing this SGB return with other investments

We all know that SGB gives the highest returns out of all types of gold investment: The Ultimate Guide to Which Type of Gold Gives the Best Returns.

We can see that the SGB has given a return higher than the gold price movement (10.88%) over 8 years due to the interest it pays out.

Please note that the rupee depreciation against the US Dollar, since most of our gold is imported, reduces the headline 128% return by 25% or the yearly return to a more pedestrian 9.27%.

We will now compare this SGB return to other asset classes starting with FD.

Comparing with fixed deposit

SBI was giving 5-10 year FDs offering a modest 7% for non-senior citizens which would have course give a return much lower due to tax. Other banks would have given higher returns but their risk would have been higher as well though all banks are covered under DICGC insurance.

Investment No tax 10% tax 20% tax 30% tax
SGB 12.90% 12.70% 12.49% 12.28%
SBI FD 7.00% 6.30% 5.60% 4.90%

Comparing with mutual funds

If we look at the universe of all equity mutual funds, and exclude thematic and sectoral funds from it, there were 132 funds at the time of issuance of this SGB which are still active today.

If we consider the 30% post-tax return case, the following 41 funds, i.e. almost 1 out 3 funds, have been beaten by the SGB.

Fund Return pre-tax Return after-tax
Nippon India Growth Fund 9.09% 8.39%
Taurus Largecap Equity Fund 9.24% 8.53%
Taurus Flexi Cap Fund 9.57% 8.85%
Lic Mf Flexi Cap Fund 10.36% 9.59%
Nippon India Tax Saver Fund 10.80% 10.00%
Aditya Birla Sun Life Elss Tax Relief ‘96 11.05% 10.24%
Bandhan Flexi Cap Fund 11.19% 10.38%
Dsp Top 100 Equity Fund 11.52% 10.69%
Franklin India Bluechip Fund 11.53% 10.70%
Lic Mf Large Cap Fund 11.77% 10.92%
Franklin India Equity Advantage Fund 11.81% 10.96%
Jm Large Cap Fund (Direct) 11.95% 11.10%
Quantum Tax Saving Fund 12.21% 11.34%
Motilal Oswal Flexi Cap Fund Direct Plan 12.38% 11.51%
Nippon India Vision Fund 12.42% 11.54%
Dsp Focus Fund 12.47% 11.59%
Groww Largecap Fund 12.48% 11.60%
Edelweiss Long Term Equity Fund (Tax Savings) 12.77% 11.88%
Axis Long Term Equity Fund 12.96% 12.06%
Tata Large Cap Fund 12.96% 12.06%
Uti Large Cap Fund 13.06% 12.15%
Aditya Birla Sun Life Equity Advantage Fund 13.06% 12.15%
Motilal Oswal Focused 25 Fund (Mof25) 13.08% 12.17%
Aditya Birla Sun Life Frontline Equity Fund 13.16% 12.24%
Aditya Birla Sun Life Focused Equity Fund 13.21% 12.30%
Lic Mf Elss Tax Saver 13.42% 12.49%
Axis Bluechip Fund 13.42% 12.50%
Axis Focused 25 Fund 13.43% 12.51%
Uti Flexi Cap 13.44% 12.51%
Hsbc Tax Saver Equity Fund 13.47% 12.54%
Icici Prudential Elss Tax Saver Fund 13.48% 12.55%
Bandhan Focused Equity Fund 13.49% 12.56%
Hdfc Elss Tax Saver 13.49% 12.56%
Sbi Blue Chip Fund 13.51% 12.58%
Hsbc Flexi Cap Fund 13.53% 12.60%
Bandhan Large Cap Fund 13.57% 12.64%
Bank Of India Large & Mid Cap Equity Fund 13.57% 12.64%
Uti Elss Tax Saver Fund 13.57% 12.64%
Hsbc Large Cap Fund 13.62% 12.69%
Union Tax Saver (Elss) Fund 13.70% 12.76%
Franklin India Taxshield 13.71% 12.77%

If we assume zero tax in both cases, then the following 18 funds have been beaten by the SGB.

Fund Return
Nippon India Growth Fund 9.09%
Taurus Largecap Equity Fund 9.24%
Taurus Flexi Cap Fund 9.57%
Lic Mf Flexi Cap Fund 10.36%
Nippon India Tax Saver Fund 10.80%
Aditya Birla Sun Life Elss Tax Relief ‘96 11.05%
Bandhan Flexi Cap Fund 11.19%
Dsp Top 100 Equity Fund 11.52%
Franklin India Bluechip Fund 11.53%
Lic Mf Large Cap Fund 11.77%
Franklin India Equity Advantage Fund 11.81%
Jm Large Cap Fund (Direct) 11.95%
Quantum Tax Saving Fund 12.21%
Motilal Oswal Flexi Cap Fund Direct Plan 12.38%
Nippon India Vision Fund 12.42%
Dsp Focus Fund 12.47%
Groww Largecap Fund 12.48%
Edelweiss Long Term Equity Fund (Tax Savings) 12.77%

Note: All of these are direct plans and regular plan returns would have been obviously worse: Do not make this mistake when investing in mutual funds.

Readers should understand that this comparison of two different asset classes should be done not on this point-to-point fashion but using rolling returns only: What are rolling returns in case of mutual funds? Why is this better than point-to-point returns?

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This post titled The first SGB issued in Nov 2015 has given 128% return in 8 years. Is that good or bad? first appeared on 26 Nov 2023 at https://arthgyaan.com


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