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SGB Analyzer

Strategy Guide

SGB Discount Hunting Strategy

Find and buy SGBs trading below their fair value

**What is Discount Hunting?**

Discount hunting is a value investing approach for SGBs where you specifically target series trading at the highest discounts to their fair value.

**Why discounts exist:** - Lower liquidity in certain SGB series - Investor preference for near-term maturities - Market inefficiencies in the SGB market - Selling pressure from institutions

**The opportunity:** When you buy an SGB at a 5-10% discount, you're essentially buying gold below market price, locking in additional returns on top of gold appreciation and 2.5% interest.

Benefits

  • Buy gold below market price
  • Higher yield to maturity
  • Built-in margin of safety
  • Amplified returns if discount narrows
  • Combines value investing with gold exposure

Risks & Considerations

  • Discounted SGBs may have lower liquidity
  • Discount might persist or widen
  • Often longer maturities (5-8 years)
  • Requires monitoring multiple series
  • Market conditions can change

Step-by-Step Implementation

1

Monitor discount levels

Use SGB Analyzer to track discounts across all SGB series daily.

Tips:

  • Sort by discount percentage
  • Track historical discount trends
  • Set alerts for target discount levels
2

Set discount thresholds

Define your target discount level for purchases.

Tips:

  • Historical average: 3-5% discount
  • Good opportunity: 5-8% discount
  • Excellent: 8%+ discount (rare)
3

Verify liquidity

Ensure the discounted SGB has adequate trading volume.

Tips:

  • Check 7-day average volume
  • Avoid very thinly traded series
  • Consider bid-ask spread
4

Execute purchase

Buy when discount meets your criteria.

Tips:

  • Use limit orders to get target price
  • Don't chase if price moves up
  • Build position gradually
5

Hold for value realization

Wait for discount to narrow or hold to maturity.

Tips:

  • Maturity guarantees fair value
  • Don't panic if discount widens temporarily
  • Collect interest while waiting

Best For

  • Value-oriented investors
  • Patient long-term investors
  • Those comfortable with illiquidity
  • Investors seeking higher yields

Not Suitable For

  • Those needing quick liquidity
  • Investors uncomfortable with market timing
  • Very short-term investors
  • NRIs (cannot invest in SGBs)
**Disclaimer:** This strategy guide is for educational and informational purposes only. It does NOT constitute investment advice, financial advice, or a recommendation to buy or sell any securities. Investment strategies involve risks and may not be suitable for all investors. Past performance does not guarantee future results. Gold prices can be volatile and SGBs have lock-in periods. Please consult a SEBI-registered investment advisor before implementing any investment strategy. Consider your risk tolerance, investment horizon, and financial goals.

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Use our calculator to estimate your potential returns based on investment amount and holding period.

Frequently Asked Questions

Historically, 5%+ discount is considered good value. 8%+ discounts are rare but excellent opportunities. Even 3-4% discount adds to your returns.
Usually due to lower liquidity, longer time to maturity, or lower investor interest. These factors don't affect the fundamental value at maturity.
Yes, at maturity you receive payment based on prevailing gold price regardless of market discount. The discount is guaranteed to become zero at maturity.

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