How Can One Diversify Their Portfolio With NBFC Bonds?

Are you a dominant equity investor? If yes, it may be time to pause and reflect. Realise that equities may deliver strong long-term growth, but they also move in cycles and react to economic events. If you run an “equity-only portfolio”, you can face sharp value swings and lack predictable income during volatile phases.

Need a solution? You may prefer investing a portion of your portfolio in NBFC bonds (based on your risk appetite). Read this article to first learn why NBFC bonds could be ideal for diversification and then see how you can use them in simple steps. 

Why Diversify a Portfolio with NBFC Bonds?

You may be a dominant equity investor focused on long-term growth. That makes sense, but realise that equity markets operate in cycles. They respond sharply to changes in:

• Interest rates
• Inflation
• Global events
• Economic slowdowns

As a result, when markets are unstable or going through a downturn:

• The value of your investments may fluctuate
  and
• You cannot clearly predict how much income or returns you will earn (because equities do not pay regular income)

Thus, your portfolio becomes “uncertain in value”, which increases reliance on market timing for returns. Okay, and how to solve this? The addition of debt instruments such as NBFC bonds may address this imbalance by:

• Providing a regular income
• Cushioning the portfolio during periods of equity market stress
• Reducing overdependence on any single asset class

When used strategically and in moderation, NBFC bonds can diversify your equity-only portfolio by creating a more balanced mix of growth and stability.

How to Create a Diversified Portfolio Using NBFC Bonds in 2026?

Before adding NBFC bonds to your portfolio, understand what they are! These are debt instruments issued by Non-Banking Finance Companies (NBFCs) to raise money. In return, they pay you a pre-determined interest.

When included in your portfolio, NBFC bonds could act as a “middle ground”. They can offer higher return potential than FDs, but may carry lower risk than equities. Now, if you are interested in creating an NBFC bond portfolio in 2026, you may follow these steps:

1. Diversify Across Types of NBFCs

NBFCs lend money across multiple segments, such as:

• Housing finance (home loans)
• Vehicle and MSME lending
• Infrastructure or equipment financing
• Retail consumer lending, and more

Each of these segments carries a different level of risk. For example, a housing finance company may depend on the real estate market, while a consumer finance NBFC depends on retail demand. 

While creating an NBFC bonds portfolio, you may prefer to spread your bond investments across NBFCs with different lending models. The advantage? You can avoid “concentrating risk” in a single area. Due to this:

• Stress in one sector may not impact all your investments interest income could become more stable
• Your debt portfolio can become less vulnerable to economic cycles

This type of diversification protects you from “sector-specific” problems.

2. Use Credit Ratings To Assess NBFC Bond Quality

Credit ratings of NBFC bonds (such as AAA, AA, A, BBB, and lower) indicate an NBFC’s ability to repay its debt. These ratings are assigned by credit rating agencies, such as ICRA, India Ratings, and CRISIL, after analysing an NBFC’s financial strength + creditworthiness. The assessment usually includes factors such as:

• The company’s asset quality,
• Capital adequacy
• Profitability
• Cash flows
• Borrowing profile
• Risk management practices, and more

Based on this analysis, a rating is assigned to indicate the level of credit risk for investors. Usually, a higher rating suggests lower default risk, while a lower rating signals higher risk and demands higher returns as compensation.

Now, to create a diversified NBFC bonds portfolio, instead of choosing only one type, you may (strictly as per your risk appetite):

• Use higher-rated bonds (AAA or AA) to anchor your portfolio
  and
• Allocate a smaller portion to high-yield bonds (A or BBB) for extra income

This mix allows you to earn better returns while keeping risk under control.

3. Diversify by Maturity (Don’t Lock Everything for One Tenure)

NBFC bonds are issued for different tenures, ranging from a few months to several years. If all your investments mature at the same time, you face two major problems: 

Okay, so what’s the solution? You may “ladder” your investments by investing in:

• Short-term bonds for liquidity
• Medium-term bonds for steady income
• Long-term bonds for higher yields

Through such a “maturity diversification”, you may reduce the risk of locking all funds at one interest rate. Also, some money becomes available at regular intervals, which serves your liquidity needs.

4. Limit Exposure to Any Single Issuer

This is where many retail investors make mistakes! When you invest a large portion of your money in bonds issued by a single NBFC, your portfolio becomes exposed to risks specific to that company. Please realise that a particular NBFC may face:

• Liquidity stress
• Regulatory action
• Rising bad loans
• Funding issues due to market conditions

Now, when this happens, bond prices can fall, or repayments may get delayed, even if the company was considered strong earlier. The solution? Don’t put all your debt in one basket. Instead, you may:

• Spread investments across bonds issued by different NBFCs
• Avoid allocating a large amount to one NBFC (regardless of its rating)
• Ensure no single issuer dominates your debt allocation

This approach limits the impact of a single company’s failure + protects your NBFC bonds portfolio from issuer-specific shocks.

To Sum Up, NBFC Bonds May Reduce Risk and Add Stability to a Portfolio

So now you know the importance of NBFC bonds in your portfolio. They may offer better returns than traditional deposits and carry lower volatility than equities. But the key is controlled exposure! As an investor, you may diversify across:

• NBFC types (Housing finance, Retail credit)
• Credit ratings (AAA, AA, BBB)
• Tenures (2, 3, 5 years)
• Issuers

Additionally, NBFC bonds work best when you invest in products that align with your risk appetite + income needs. Always remember that overexposure or chasing high yields can increase risk.

If you are interested in the bond market & NBFCs, you may explore the GoldenPi platform. Here, you can access multiple NBFC bond series issued by PSUs and retail corporate houses. Also, all the bonds are listed along with important details such as issuer, coupon rates, maturity dates, credit ratings, and more.

NBFC Bonds Portfolio FAQs

Are NBFC bonds less liquid than shares?

Usually, the trading volumes of listed NBFC bonds are comparatively lower than equity shares. As a result, you may not always find a buyer when you want to sell before maturity, or you may have to accept a lower price. Note that liquidity improves for bonds issued by large and well-known NBFCs and for shorter-tenure bonds.

Why are NBFC bonds considered safer than equities?

That’s because NBFC bonds offer pre-determined interest payments and come with a defined maturity date. Also, bond investors rank higher than equity shareholders in the case of financial stress or liquidation.

Are NBFC bond investments covered under DICGC insurance?

No, NBFC bonds are not covered under the DICGC (Deposit Insurance and Credit Guarantee Corporation) insurance scheme. DICGC protection applies only to bank deposits such as savings accounts, fixed deposits, and current accounts, up to the current prescribed limit of ₹5 lakhs (per bank, per depositor).

How can you assess the NBFC bond quality?

To assess the NBFC bond quality, start by checking the credit rating and the rating agency’s rationale. Higher ratings may indicate lower default risk and greater financial strength. Additionally, you should also review the NBFC’s business model, loan book quality, and past repayment record.

What is NBFC bond laddering?

NBFC bond laddering is a strategy where you invest in bonds with different maturity dates instead of locking all money into one tenure. For example, you may invest in bonds maturing in one, three, and five years. This makes sure you keep receiving regular cash inflows, which reduces reinvestment risk and limits the impact of interest rate changes. 

Disclaimer:

This information is for general information purposes only. GoldenPi makes no guarantee on the accuracy of the data provided here; the information displayed is subject to change and is provided on an as-is basis. Nothing contained herein is intended to or shall be deemed to be investment advice, implied or otherwise. Investments in the 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.

Bonds or non-convertible debentures (NCDs) are regulated by the Securities and Exchange Board of India and other government authorities. GoldenPi Securities Private Limited is a registered debt broker and acts as a distributor and not as a manufacturer of the product.