On Friday, NSE Indices Ltd, a subsidiary of the NSE, said it had launched the country’s first municipal bond index.

The new Nifty India Municipal Bond Index will track the performance of municipal bonds issued by Indian municipal corporations with investment-grade credit ratings across maturities, NSE Indices said in a statement.

The index was launched at a seminar on municipal bonds held by the Securities and Exchange Board of India (Sebi) in Bengaluru.

Currently, the index has 28 municipal bonds issued by 10 issuers, all rated AA. Index constituents are assigned weights based on their outstanding amounts.

The Indian municipal bond market recovered in issuance after Sebi’s Issue and Listing of Municipal Debt Securities Regulations 2015 came into force, and policymakers re-emphasised municipal finance.

Raising funds from capital markets can incentivise municipal corporations to fund new projects and improve municipal infrastructure while encouraging them to be more financially disciplined and governance-oriented.

“The municipal bond market has the potential to play a key role in financing the borrowing needs of the different municipal corporations in India. Proceeds from municipal corporation bond issuances can finance the expansion of essential municipal services through growth-driven infrastructure projects and help bridge India’s Urban infrastructure financing gap,” said Mukesh Agarwal, CEO of NSE Indices.

The index is calculated using a total return methodology, including price and coupon returns. The index takes January 1, 2021, as the base date, and the base value is 1,000 points. The index will be reviewed quarterly.