Best Sovereign Gold Bonds to buy from secondary market
Sovereign gold bonds are being offered in several tranches by Govt of India during the year. These are offered at Rs 50 lower price per gram which is approx. 1% lower than the issue price. Sovereign gold bonds would trade on the stock exchange like any other stocks as these are issued in demat account too. However, if you observe, some of the sovereign gold bonds are trading at lower prices on stock exchanges compared to current issue price. Some of you might be thinking to buy from the secondary market instead through regular bonds offered directly by Govt of India. However, many are making mistakes of buying bonds that provides low returns. Which are the best Sovereign Gold Bonds to buy from secondary market? Do lower price gold bond would give high returns?
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Quick overview about Sovereign Gold Bond Scheme
If you are already aware about these gold bonds, skip this section.
Sovereign gold bonds are issued by Govt of India.
These bonds are issued in the denomination of units. 1 Gram denotes 1 unit.
Govt of India is issuing these bonds in several tranches during the year.
These bonds have a maturity period of 8 years. However, one can do premature withdrawal after 6 years.
These bonds have interest rates of 2.5% per annum.
On maturity, the equivalent value of gold gram units would be credited to your bank account. Means there is no physical delivery of gold.
Sovereign Gold Bonds through regular tranche Vs Secondary market
When you buy these bonds directly during the subscription period, one can get Rs 50 off per unit. This is approximately 1% of the gold value (depending on the value of the unit value).
However, when you buy from the secondary market, there is no such discount offered by Govt of India. However, these can be purchased from stock exchanges are rate which is being offered by selling holders of these bonds.
Here are the Sovereign gold bonds that are trading on October 19, 2020 and their market prices. We have taken out only where there are sales happening for such bonds beyond 20 units.
| Symbol | Last Traded Price |
|---|---|
| SGBSEP27 | 4,831 |
| SGBJUL28IV | 4,838 |
| SGBJUN28 | 4,843 |
| SGBAUG28V | 4,845 |
| SGBJAN27 | 4,850 |
| SGBMAY28 | 4,853 |
| SGBAPR28I | 4,859 |
| SGBMAY25 | 4,860 |
| SGBSEP28VI | 4,866 |
| SGBMAR25 | 4,895 |
| SGBSEP24 | 4,898 |
| SGBMAY26 | 4,900 |
| SGBOCT25IV | 4,900 |
| SGBNOV25VI | 4,900 |
| SGBAUG24 | 4,913 |
| SGBMAR24 | 4,914 |
| SGBNOV24 | 4,930 |
| SGBFEB24 | 4,949 |
| SGBDC27VII | 4,980 |
If you observe, these bonds are trading at Rs 4,831 to Rs 4,980 per bond. The last bond price that was issued by Govt of India in Oct-20 tranche was Rs 5,051. Even we consider discount of Rs 50, investors has actually paid Rs 5,000. Can we straight away buy Rs 4,831 per bond from secondary market instead of buying from Govt of India? The answer is NO. Do you know that with this step, you would be getting 30% lower returns? One should not just look for market price alone. One should also look for the subscription price + interest payment which would be done in every 6 months. Lets keep an interest portion aside for the time being instead of complicating too much.
Let me explain with few examples.
1) You have bought sovereign gold bonds in last tranche (Oct-20) where it was offered for Rs 5,051. Assume you have invested Rs 5 Lakhs and you would have got approx. 100 units (before any discounts). You would get Rs 12,500 as interest on such bonds every year.
2) Now let us assume you want to invest this Rs 4,831 (lowest) bond available damn cheap instead of investing at over Rs 5,000 direcly from GOI. Assume you have invested Rs 5 Lakhs and you would have got approx. 103.5 units. You would get Rs 10,065 as interest on such bonds every year. Why such a low interest is because interest is paid on subscription price and NOT on market price of these bonds. The subscription price of this tranche bonds are Rs 3,890 per bond, but trading at Rs 4,831 now.
This is approximately 25% lower interest what you would have gotten by going blindly with bonds from the secondary market.
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Best Sovereign Gold Bonds to buy from secondary market
One should mainly look for the subscription price. If subscription price is high, then interest is high. One can go for highest subscription price and lowest market price bonds. All bonds issued during that year would have a similar maturity amount for that year (except for some variations).
Here is the list of Sovereign gold bonds that are being traded in secondary market now in 2020 along with their current market price, subscription price, maturity period and annualized interest one would get it. Depending on the tenure you want to buy you can choose the highest interest earned sovereign gold bonds for that period.
Eg. If you want to invest for 7-8 years in these gold bonds from secondary market instead directly from Govt of India, you can choose Jul, Aug and Sep tranche bonds available now on the secondary market that are giving highest interest. If you see from below list, longer the tenure of bond, the higher is the interest rate.
I am giving Last Traded Price (LTP)
Subscription Price (Sub Price)
Yearly Interest for 5 L investment
Maturity Date
| Symbol | LTP | Sub Price | Yly Interest | Maturity |
|---|---|---|---|---|
| SGBAUG28V | 4,845 | 5334 | 13,762 | Aug-28 |
| SGBSEP28VI | 4,866 | 5117 | 13,145 | Sep-28 |
| SGBJUL28IV | 4,838 | 4852 | 12,536 | Jul-28 |
| SGBJUN28 | 4,843 | 4677 | 12,072 | Jun-28 |
| SGBAPR28I | 4,859 | 4639 | 11,934 | Apr-28 |
| SGBMAY28 | 4,853 | 4590 | 11,824 | May-28 |
| SGBSEP27 | 4,831 | 3890 | 10,065 | Sep-27 |
| SGBDC27VII | 4,980 | 3795 | 9,526 | Dec-27 |
| SGBJAN27 | 4,850 | 3164 | 8,155 | Jan-27 |
| SGBSEP24 | 4,898 | 3150 | 8,039 | Sep-24 |
| SGBAUG24 | 4,913 | 3119 | 7,936 | Aug-24 |
| SGBMAY26 | 4,900 | 3064 | 7,816 | May-26 |
| SGBNOV24 | 4,930 | 2957 | 7,497 | Nov-24 |
| SGBOCT25IV | 4,900 | 2937 | 7,492 | Oct-25 |
| SGBMAY25 | 4,860 | 2901 | 7,461 | May-25 |
| SGBMAR24 | 4,914 | 2916 | 7,418 | Mar-24 |
| SGBMAR25 | 4,895 | 2893 | 7,388 | Mar-25 |
| SGBNOV25VI | 4,900 | 2895 | 7,385 | Nov-25 |
| SGBFEB24 | 4,949 | 2600 | 6,567 | Feb-24 |
If you would like to know subscription price and latest prices on secondary market, you can visit this NSE link.
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Hi,
On maturity, the equivalent value of gold gram units would be credited to your bank account
From above line for knowledge purpose, who will decide the value of gold? is it by Govt of India or secondary market rate?
Hello Ramesh, If you see the Price is based on the average price of the preceding 3 days of the issue opening date which is fixed by Govt of India. I guess the same applies for redemption.
Great article and best explanation. Good job Suresh.
From where we can get the Subscription price & Last Traded Price
Thank you. You can check this NSE link for latest SGB prices on NSE + their subscription price. https://www1.nseindia.com/live_market/dynaContent/live_watch/equities_stock_watch.htm?cat=SGB
Thanks for replying back generously to my previous question, Suresh.
I have another one for you:
1. As there is no LTCG on SGB, but it is applicable when the bonds are sold on the stock market before maturity, will I be charged LTCG on my bonds which I bought from the market but DO NOT sell-off before maturity?
2. As the government issues a certificate when we buy the bond directly from RBI, how will I get that certificate if I buy the bonds from the stock market?
Thanks in advance!
Hello Chayan,
LTCG is applicable if you sell them on stock market before maturity. If you buy from GOI or from secondary market and hold them till maturity, no LTCG is charged
If you buy from secondary markets these bonds would be directly credited to your demat account and you would not get any separate certificate for these SGB
Got it. Thanks a ton Suresh 🙂
Hi Suresh,
If I buy the SGBAUG28 in the secondary market now, will the 6-month interest still get credited in my DEMAT? What is the process of that?
Hello Chayan, It would be paid every months based on the issue date. In this case of Aug-2020 SGB it is Series V and issued on 11-August-2020. It would be paid every 6 months from the date of issue. Next interest would be on 11-Feb-2021. Before the interest date, you should have these bonds in your demat account for eligible to get interest. Interest would be paid to your demat linked bank account
Hi,
The current (11th) tranche of SGB is priced at Rs 4,912 per gm with a discount of Rs 50/gm for online investors. On the other hand, prices of MCX gold has corrected post-budget announcement to trade in the range of Rs 46,500-47,000/10gm.
Is it advisable to wait for the next tranche of SGB in the month of March or better to buy SGBAUG28V from secondary market?
Hello Ranjan, In short term gold prices may show sharp decline. You may wait till next tranche and decide
Hey Suresh,
What is subscription price you mentioned about? and as I am new how can i check which one to buy from Secondary market instead of SGB by Govt.
Thanks,
Nidhi
Nidhi, Subscription price is the price of the bond which govt of india sold to subscribers. It would remain same based on which interest is paid. e.g. Rs 5,200 per bond. The market price of bond would change if you are buying or selling on stock exchange. However subscription price remains same
Good useful article. Wish you more success.
I have two questions Suresh.
In Nov-Dec 2020-Jan -21, I have purchased 32 gms SGBMAR25-GB, 57 gms SGBMAY25-GB and 4 gms of SGBMAY26-GB in Secondary Market via Zerodha. They are linked to my CDSL DEMAT Account. Question is will I get the half yearly interest?
Secondly, my son subscribed to SGB 20-21Series in May 2020 through Online Banking. This was before he had a DEMAT Account. Now he has a DEMAT Account, but the SGB holding is not reflected there. Interest has also not been credited to his SB account.
I approached the local SBI Branch but they say they do not know what to do.
I also wrote to SBI Caps for linking with DEMAT, and they wrote back that they will not be to help. I also wrote to SGB Helpdesk at RBI. They have not replied.
What should I do to link the holdings to his DEMAT account?
Do let me know. Thanks and Best Regards …
Hi Shankar, Even if you buy from secondary market, but before the cut-off date, interest would be credited to you for 6 months. I heard the cut-off date is 1 week before allotment date. You can check on that part.
Regd, your son SGB certificate not received issue. We don’t need to apply only through demat account. One can apply through Bank or Post office and a Certificate of Holding on the date of issuance of the SGB. The Certificate of Holding can be collected from the issuing banks/SHCIL offices/Post Offices/Designated stock exchanges/agents. Since the bank has no clue on this, you can get E-Certificate directly from RBI on the respective email address provided in the application form. You can reach out to specific SGB email ID provided by RBI: sgb@rbi.org.in
Once you get response, kindly acknowledge this comment with any additional steps you would have taken to solve your problem. This would help other members to know that this process is actually working 100%
Hi Suresh,
If you could provide me latest details or shall I still consider buying SGBAUG28V (Rs. 4812)
Or Shall I go for latest SGB Scheme 2020-21-Series VIII, which opened for subscription on November 9, has been fixed at Rs 5,177 per gram with a Rs 50 per gram discount for online subscription.
Regards,
Deepak P
Hello Deepak, Yes, Instead of buying from Govt of India, you can check for SGBAUG28V trading at 4,812 or SGBJULIV which is trading at 4,834 as of today.
Very useful article – thank you
Thank you Sivaprakash
Hello,
Very informative article.
I have one doubt:
Are the capital gain tax free (on maturity) only for original allottee or is it tax free for those who are purchasing from secondary market.
In short I purchase SBG from secondary market which has only 2 years to maturity. I hold it maturity….would the capital gains be tax free?
Hello Neelam, The maturity is tax free if we redeem with Govt of India on maturity. It is immaterial whether it is purchased directly or through stock exchange.
Thanks for clarifying Sureshji
I am having long term doubt now only clear. Thanks. Even I am not able to find correct feedback from brokers itself.
Thank you Palaniappan
Thanks alot for your article on SGB investment through secondary market.
I always had this question, in case we buy SGB from secondary market then whether we will get the interest or not? and if yes then how it will be updated in the records of RBI to whom the interest need to be paid?
Can you please suggest – should we buy SGB during the interest payout time (before or after) which is paid every six months.
Hello Jethanand, If any one purchases initially through GOI, necessary SGB bonds would be credited to their demat account. Interest is paid to them. If any one purchases from secondary market, these are transferred from one person to another person and the person holding on the cut-off date would get the interest in their account.
This really helps Suresh.
I must say that till now no one has cleared the doubt on SGB, particularly on this point. None of the article or youtube video.
Appreciate your efforts and help to people like us.
Thanks
Good to hear this Jethanand. Pls share such articles on your Facebook which might be useful for your friends too
Great point. But why should the secondary market price be so different from the new bonds? After all all are priced on the basis of gold price. Or is it due to supply versus demand for the secondary market bonds?
Hello Mani, It is like share price. If someone is ready to sell, but there are no buyers, what he would do? He would sell at lower rate. Same case here.