PNB Gilts Ltd. shares surged as much as 17% on Thursday, May 14, following a Bloomberg report citing sources with knowledge of the matter who stated that the government is considering reducing taxes paid by foreign investors in the bond market. According to the Bloomberg report, the Reserve Bank of India made this recommendation and the Finance Ministry is considering it seriously. This marks the biggest single-day gain for the stock since January 2024, when it had surged as much as 19%. As reported by CNBC TV18, the move sparked a sharp recovery in the currency market and bond yields, which also triggered a swift upmove in the equity markets.
Shares of PNB Gilts are trading 16% higher on Thursday at ₹80.11, as reported by CNBC TV18. The stock has recovered nearly all of its losses for the year after this upmove. As a designated Primary Dealer (PD) by the RBI, their entire business revolves around buying, holding, and selling government securities (G-Secs), treasury bills, and corporate bonds. The company's business model is entirely dependent on the bond market's health and activity levels.
According to CNBC TV18's analysis, more money flowing into the bond market benefits PNB Gilts in different ways. First, higher trading activity means more opportunities to book quick trading profits on the price difference (the bid-ask spread). Second, when PNB Gilts builds up its own investment portfolio of bonds, it earns steady, predictable interest income via coupon payments. If bond yields are higher, they have strong returns. Third, PNB Gilts charges a commission for ensuring these bond issues hit the market successfully, with more bond supply and higher investor appetite directly equal to a bigger fee pool for them. Fourth, a more liquid bond market is beneficial as they can enter or exit major positions quickly without causing sharp swings that could hurt their balance sheet.
