Module: General Practice
Q163: To deepen the corporate bond market, the Budget 2026-27 proposed the introduction of a "Market Making Framework." This framework specifically allows access to funds and derivatives on which underlying asset?
✅ Correct Answer: A
The framework allows access to funds and derivatives on Corporate Bond Indices. "Market Making" involves designated entities (Market Makers) who provide both buy and sell quotes to ensure liquidity in a market.
The secondary market for corporate bonds in India is illiquid (hard to sell bonds quickly). By allowing derivatives (like futures/swaps) on Corporate Bond Indices, the budget enables investors to hedge their risks.
This encourages more participants (like mutual funds and insurers) to trade actively, thereby deepening the market and lowering borrowing costs for companies.
The secondary market for corporate bonds in India is illiquid (hard to sell bonds quickly). By allowing derivatives (like futures/swaps) on Corporate Bond Indices, the budget enables investors to hedge their risks.
This encourages more participants (like mutual funds and insurers) to trade actively, thereby deepening the market and lowering borrowing costs for companies.