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