How to Sell Bonds in Secondary Market in India

30 October 2025

What is the Secondary Market?

The Indian bond market has gained remarkable traction in recent years, offering retail investors more accessibility and transparency than ever before. With the introduction of SEBI’s Online Bond Platform Providers (OBPPs) framework, investors can now buy and sell bonds digitally through registered platforms.

While many investors are familiar with purchasing bonds in the primary market, understanding how to sell bonds in the secondary market is equally important. This article explains the meaning of the secondary market, how it differs from the primary market, and the process of selling bonds in India.

The secondary market is a platform where existing financial instruments—such as bonds, shares, or debentures—are traded between investors after being issued in the primary market.

In simpler terms, if you buy a bond when it is first issued, that transaction happens in the primary market. When you decide to sell that bond to another investor before it matures, the transaction takes place in the secondary market.

Secondary markets provide liquidity to investors, enabling them to exit before maturity instead of waiting for the issuer to redeem the bond.

Difference Between Primary Market and Secondary Market

AspectPrimary MarketSecondary Market
DefinitionWhere new bonds are issued by companies or governments for the first time.Where existing bonds are traded among investors.
ParticipantsIssuer and investors.Investors trading among themselves.
PurposeTo raise fresh capital.To provide liquidity and price discovery.
PriceFixed by the issuer at issuance.Determined by market demand and supply.
ExampleBuying a newly issued corporate bond.Selling the same bond before maturity to another investor.

How the Secondary Bond Market Works in India

In India, the secondary bond market operates through:

  • Stock exchanges such as NSE and BSE, where listed bonds are traded electronically.

  • Over-the-Counter (OTC) markets, where trades are conducted directly between parties via brokers or intermediaries.

  • Online Bond Platforms, registered with SEBI as OBPPs, offering transparent, exchange-linked transactions and secure settlements through clearing corporations.

Every transaction in the secondary market occurs between two investors, and the issuer of the bond is not directly involved.

Steps to Sell Bonds in the Secondary Market

If you hold bonds and wish to liquidate them before maturity, here’s a step-by-step breakdown of how to sell them in India’s secondary market:

Step 1: Hold Bonds in Demat Form

Ensure that your bonds are held in dematerialized (Demat) format with a registered Depository Participant (DP) such as NSDL or CDSL. Bonds in physical form cannot be traded on electronic exchanges.

Step 2: Choose a Platform or Broker

  • Select a SEBI-registered intermediary or platform for the sale. This could be:

A stockbroker offering bond trading facilities, or

  • An Online Bond Platform Provider (OBPP), which integrates with exchanges and clearing corporations for transparency.

Step 3: Check the Current Market Price

The price of your bond in the secondary market depends on several factors:

  • Current interest rate trends

  • Credit rating of the issuer

  • Remaining tenure to maturity

  • Coupon rate (interest payout) compared to prevailing market yields

  • Bond prices are inversely related to interest rates—when rates rise, bond prices generally fall.

Step 4: Place a Sell Order

Once you review market conditions, you can place a sell order through your chosen platform or broker. The bond will be listed for potential buyers to view and purchase.

If another investor places a matching buy order, your sale will be executed at the agreed market price.

Step 5: Settlement and Credit

After the trade is executed:

  • The buyer receives the bond units in their Demat account.

  • The seller receives the sale proceeds in their linked bank account.

All settlements for listed bonds are done through clearing corporations, ensuring secure and standardized transactions.

Factors Affecting Bond Prices in the Secondary Market

Bond prices fluctuate daily based on several economic and market dynamics:

  • Interest Rate Movements: When RBI raises policy rates, existing bonds with lower coupons may see a price decline.

  • Issuer’s Creditworthiness: Downgrades in credit ratings can reduce demand and bond prices.

  • Time to Maturity: Shorter-tenure bonds usually exhibit lower price volatility.

  • Market Liquidity: Highly traded bonds often enjoy more stable prices due to better liquidity.

Tax Implications When Selling Bonds

When you sell bonds in the secondary market, capital gains tax applies based on the holding period:

  • Short-Term Capital Gains (STCG): If sold within 12 months, gains are added to your taxable income and taxed as per your income slab.

  • Long-Term Capital Gains (LTCG): If held for more than 12 months, gains are taxed at 10% without indexation benefits (for listed bonds).

Investors should consult a tax advisor for detailed, case-specific guidance.

Advantages & Risks

Advantages of Selling Bonds in the Secondary Market

  • Liquidity: Ability to convert bonds into cash before maturity.

  • Flexibility: Manage your portfolio dynamically based on market conditions.

  • Price Discovery: Transparent valuation through exchange-based trading.

  • Diversification: Reallocate funds into different asset classes as needed.

Risks to Consider

While the secondary bond market provides flexibility, investors should also be aware of the following risks:

  • Price Fluctuations due to changing interest rates.

  • Liquidity Risk if few buyers are available for your bond.

  • Credit Risk if the issuer’s financial condition deteriorates.

Being aware of these factors helps make informed decisions while exiting a bond investment.

Conclusion

The secondary market plays a crucial role in maintaining liquidity and accessibility within India’s bond ecosystem. Understanding how to sell bonds in the secondary market empowers investors to manage their portfolios effectively, respond to market conditions, and optimize cash flow.

By following a structured approach—holding bonds in Demat form, using regulated platforms, and understanding market pricing—you can sell bonds securely while complying with SEBI’s transparent framework.

Frequently Asked Questions (FAQs)

Q1. What is the secondary market in bonds?

The secondary market is where existing bonds are traded among investors after their initial issuance in the primary market.

Q2. How can I sell my bonds in India?

You can sell bonds through SEBI-registered brokers or online bond platforms like BondScanner that facilitate exchange-based transactions.

Q3. What affects bond prices in the secondary market?

Interest rate changes, credit ratings, liquidity, and time to maturity are key factors influencing bond prices.

Q4. Is selling bonds before maturity allowed?

Yes. You can sell bonds in the secondary market before maturity to another investor at the prevailing market price.

Q5. What are the tax implications of selling bonds?

Capital gains tax applies to profits earned from selling bonds, based on the holding period and type of bond.

Disclaimer

This blog is intended solely for educational and informational purposes. The bonds and securities mentioned herein are illustrative examples and should not be construed as investment advice or personal recommendations. BondScanner, as a SEBI-registered Online Bond Platform Provider (OBPP), does not provide personalized investment advice through this content.

Readers are advised to independently evaluate investment options and seek professional guidance before making financial decisions. Investments in bonds and other securities are subject to market risks, including the possible loss of principal. Please read all offer documents and risk disclosures carefully before investing.

Contact Us

SustVest Broking Private Limited
Sco No. 32 2nd Floor, M3M 113 Market, Sector 113, Narsinghpur, Gurgaon, Narsinghpur, Haryana, India, 122004

Get in touch

support@bondscanner.com
+91 70118 69639

Regulatory Information

Privacy PolicyTerms and ConditionsInvestor Charter

SustVest Broking Private Limited (U66120HR2024PTC119856), Member of NSE - SEBI Registration No.: INZ000320834, NSE Member Code: 90404

Registered Office: Sco No. 32 2nd Floor, M3M 113 Market, Sector 113, Narsinghpur, Gurgaon, Narsinghpur, Haryana, India, 122004
Corporate Office: Sco No. 32 2nd Floor, M3M 113 Market, Sector 113, Narsinghpur, Gurgaon, Narsinghpur, Haryana, India, 122004
Compliance Officer: CS Vandana Jhinjheria; Contact No: +91 70118 69639; Email id: Vandana.jhinjheria@bondscanner.com
For grievances: Phone: +91 70118 69639

Investment in securities market are subject to market risks, read all the related documents carefully before investing.

Procedure to file a complaint on SEBI SCORES:
(i) Register on SCORES portal
(ii) Mandatory details for filing complaints on SCORES: Name, PAN, Address, Mobile Number, E-mail ID
(iii) Benefits: Effective communication, Speedy redressal of the grievances

i. Prevent Unauthorised transactions in your account - Update your mobile numbers/email IDs with your Stock Brokers. Receive information of your transactions directly from Exchange on your mobile/email at the end of the day. Prevent Unauthorized Transactions in your demat account Update your Mobile Number with your Depository Participant. Receive alerts on your Registered Mobile for all debit and other important transactions in your demat account directly from NSDL/CDSL on the same day.

ii. There is no need to issue a cheque. Please write the Bank account number and sign the IPO application form to authorize your bank to make payment in case of allotment. In case of non-allotment the funds will remain in your bank account. Issued in the Interest of Investor. Investments in securities market are subject to market risks; read all the related documents carefully before investing.

iii. KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.

iv. Investor awareness on fraudsters that are collecting data of customers who are already into trading on Exchanges and sending them bulk messages on the pretext of providing investment tips and luring them to invest with them in their bogus firms by promising huge profits.

v. Advisory for investors - Clients/investors to abstain them from dealing in any schemes of unauthorised collective investments/portfolio management, indicative/ guaranteed/fixed returns / payments etc.

1. Risk warning:
Investments in debt securities/municipal debt securities/securitised debt instruments are subject to risks including delay and/or default in payment. Read all the offer related documents carefully.

2. SCORES Procedure:
Procedure to file a complaint on SEBI SCORES- (i) Register on SCORES portal (ii) Mandatory details for filing complaints on SCORES: Name, PAN, Address, Mobile Number, E-mail ID (iii) Benefits: Effective communication, Speedy redressal of the grievances

Attention Investors:
1. Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 01, 2020.
2. Update your email id and mobile number with your stock broker / depository participant and receive OTP directly from the depository on your email id and/or mobile number to create a pledge.
3. Check your securities / MF / bonds in the consolidated account statement issued by NSDL/CDSL every month.

SEBI (https://www.sebi.gov.in)|NSDL (https://www.nsdl.co.in)|CDSL (https://www.cdslindia.com)|NSE (https://www.nseindia.com)|BSE (https://www.bseindia.com)|SMART ODR PORTAL (https://smartodr.in/login)