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What are MLDs?

Market Linked Debentures (MLD) are the fixed income instruments, regulated by SEBI, whose returns are linked to either a particular security or market Index such as government security, gold index fund, or Nifty Index fund, etc.

Majorly there are two types of Market Linked Debentures-

  • Principal Protected
    Principal protected market linked debentures protect investors against the downsides of the underlying market sector. As opposed to other types of MLDs where the investors’ money is lost in case of a downside, principal-protected MLDs offer financial security to investors in case of any mishaps. A principal-protected MLD holder at least gets their principal back and a market-linked coupon.
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  • Non-Principal Protected
    Non-principal protected MLDs, as their name suggests, do not offer the principal amount back to investors in case of downsides or mishaps. As opposed to the principal protected MLDs, non-principal protected MLDs are riskier to invest in since no sort of compensation is provided to investors in case of downsides.

Benefits of MLD


Hybrid Exposure to asset classes
The primary benefit of investing in Market Linked Debentures is that it allows a person to profit from the growth of other markets without actually investing in them, such as equity or G-secs.

A multitude of options
A lot of reputable companies with excellent credit scores have also recently entered this market. An investor can thus choose from a large selection of debentures with a high credit profile and a variety of base markets.

Safeguarded against negative risks
Principal-safeguarded MLDs ensure that an investment is safeguarded from the underlying market’s downturn. Therefore, Market Linked Debentures protect an investor’s principal investment as opposed to a direct equity transaction, where the capital is lost in the event of a downside.

Superior return potential in comparison to traditional investments
When compared to more conventional investments like fixed deposits, or such as those, Market Linked Debentures provide investors comparable benefits because they allow them to profit from a market’s rising performance and are also tax efficient. Compared to the two conventional asset kinds, the structure is in a sweet spot.