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Which SGB series should you buy based on the highest discount?

Posted on 18 Sep 2024
Author: Sayan Sircar

Tags: Gold

5 mins read
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This article shows you how to find SGBs trading at the maximum discount in the share market for long-term investment.

Which SGB series should you buy based on the highest discount?

📚 Topics covered:

What is the value of an SGB?
Which SGB series are trading at the highest discount to fair value?
What are the points to remember before buying SGB from the share market at a discount?

What is the value of an SGB?

After gold-price duty cut in Budget 2024, there is a lot of speculation in the market that new Sovereign Gold Bond (SGB) issues will not come.

Therefore, many investors, especially those who know that SGB gives the highest return of all types of gold, are trying to buy SGB from the share market. This article shows you which SGBs are currently trading at a discount.

The price of an SGB, i.e. the Fair Value, in the stock market depends on the demand and supply of the SGB apart from its intrinsic value.

Fair Value of SGB = Intrinsic value + Demand-supply effects

Intrinsic value depends on two things:

the current market price of 24-karat gold
the present value of all the interest payments yet to be received

The effect of demand-supply factors is unpredictable. Therefore we must understand how to calculate the intrinsic value of the SGB.

Intrinsic value = Gold price + present value of interest payments (PV) where PV = ([[Issue Price]] * [[Interest Rate]]/2 * (1 - (1 + (Discount Rate/2)) ^ -(([[Maturity Date]]-Today’s Date)/365.25 * 2))) / (Discount Rate/2)

We have assumed 9% as the interset rate.

If the SGB is quoted lower than this number, you should buy it. We have covered the exact calculation of the fair value of an SGB here: Sovereign Gold Bond (SGB): Which Series is Best for You?

Note: Only resident Indians can purchase SGB. NRIs trying to invest in SGB via resident demat accounts (where KYC is not updated to NRI status) violates RBI rules.

Which SGB series are trading at the highest discount to fair value?

Here is the latest list of SGBs trading at a discount:

Gold price is ₹ 7325.70 per gram (as on 18-Sep-2024)

Highest Discount	SGB	Maturity Date	Fair Value
2.24%	SGBD29VIII	07-Dec-2029	7,815.69
1.91%	SGBFEB29XI	09-Feb-2029	7,763.19
1.69%	SGBMAR30X	08-Mar-2030	7,867.66
1.43%	SGBJU29III	08-Jun-2029	7,787.23
1.39%	SGBJAN30IX	18-Jan-2030	7,823.63
1.36%	SGBJUN31I	27-Jun-2031	8,064.61
1.29%	SGBMAR31IV	14-Mar-2031	8,003.32
1.21%	SGBJAN29X	19-Jan-2029	7,775.41
1.21%	SGBJUN30	29-Jun-2030	7,889.24
1.19%	SGBAUG29V	17-Aug-2029	7,792.58
1.17%	SGBSEP29VI	07-Sep-2029	7,791.23
1.17%	SGBSEP31II	20-Sep-2031	8,082.63
1.13%	SGBJUL29IV	20-Jul-2029	7,788.37
1.13%	SGBJAN29IX	05-Jan-2029	7,763.04
1.07%	SGBFEB32IV	21-Feb-2032	8,160.30
0.97%	SGBOCT27	15-Oct-2027	7,574.83
0.92%	SGBDE31III	28-Dec-2031	8,139.82
0.86%	SGBN28VIII	18-Nov-2028	7,767.05
0.80%	SGBJUN29II	01-Jun-2029	7,781.29
0.78%	SGBNV29VII	02-Nov-2029	7,805.54
0.69%	SGBFEB28IX	11-Feb-2028	7,617.77
0.46%	SGBJUN28	16-Jun-2028	7,690.15
0.31%	SGBMAY29I	25-May-2029	7,773.70
0.28%	SGBJUL27	16-Jul-2027	7,535.95
0.26%	SGBJUL28IV	14-Jul-2028	7,710.31
0.25%	SGBOC28VII	20-Oct-2028	7,749.49
0.20%	SGBAUG28V	11-Aug-2028	7,755.64
0.20%	SGBOCT27VI	30-Oct-2027	7,580.85
0.16%	SGBMAR28X	11-Mar-2028	7,637.52
0.16%	SGBAUG30	30-Aug-2030	7,913.85
0.15%	SGBSEP28VI	08-Sep-2028	7,744.94
0.11%	SGBDE30III	27-Dec-2030	7,963.02

You will need to place the order for your chosen SGB via your Demat account.

Did you know that we have a private Facebook group which you can join for free and ask your own questions? Please click the button below to join.

Also read
How to accumulate gold for a child's wedding without buying SGB?

If you are investing in SGB, you need to be sure of the purpose of that investment. If you are accumulating gold for a future need like a child’s marriage, you need to buy that series with the highest maturity.

Of course, whenever you are placing an order for a thinly traded security like an SGB, then you need to ensure that you do not get a price so high that any discount to fair value disappears. Placing limit orders to lock in the purchase price is important.

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