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

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?


Posted on 18 Sep 2024
Author: Sayan Sircar
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?

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 ₹ 7,564.00 per gram (as on 27-Sep-2024)

Highest Discount SGB Maturity Date Fair Value
2.15% SGBJUN30 29-Jun-2030 8,125.69
2.05% SGBJAN30IX 18-Jan-2030 8,060.13
1.96% SGBSEP28VI 08-Sep-2028 7,981.06
1.85% SGBSEP29VI 07-Sep-2029 8,027.69
1.80% SGBDE31III 28-Dec-2031 8,376.15
1.59% SGBJUN29II 01-Jun-2029 8,017.66
1.55% SGBD29VIII 07-Dec-2029 8,052.16
1.52% SGBDE30III 27-Dec-2030 8,199.44
1.45% SGBNV29VII 02-Nov-2029 8,042.01
1.37% SGBOCT27VI 30-Oct-2027 7,817.39
1.26% SGBAUG29V 17-Aug-2029 8,029.00
1.21% SGBMAR31IV 14-Mar-2031 8,239.71
1.20% SGBJUN31I 27-Jun-2031 8,300.94
1.12% SGBFEB29XI 09-Feb-2029 7,999.48
1.09% SGBJAN29IX 05-Jan-2029 7,999.27
1.09% SGBJU29III 08-Jun-2029 8,023.58
1.07% SGBOC28VII 20-Oct-2028 7,985.67
1.04% SGBMR29XII 09-Mar-2029 7,983.25
1.02% SGBJAN29X 19-Jan-2029 8,011.60
0.93% SGBJUL29IV 20-Jul-2029 8,024.77
0.79% SGBN28VIII 18-Nov-2028 8,003.19
0.78% SGBMAY29I 25-May-2029 8,010.09
0.65% SGBJUN28 16-Jun-2028 7,926.42
0.64% SGBJUL28IV 14-Jul-2028 7,946.52
0.53% SGBSEP31II 20-Sep-2031 8,319.00
0.42% SGBFEB28IX 11-Feb-2028 7,854.25
0.37% SGBJAN27 22-Jan-2027 7,728.68
0.27% SGBAUG28V 11-Aug-2028 7,991.66

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
Frequently asked questions on saving tax via Hindu Undivided Family (HUF): the complete guide

What are the points to remember before buying SGB from the share market at a discount?

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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This post titled Which SGB series should you buy based on the highest discount? first appeared on 18 Sep 2024 at https://arthgyaan.com


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