PR Sundar Finfluencer, a financial influencer, explains market-linked debentures using an example: Let's say you invest Rs 100 in a company's market-linked debenture. They promise to give you back Rs 114 after two years, which seems like a 14% return. But hold on, this 14% isn't what you'd get every year. When you calculate it annually, it's less than 6%. However, there's a catch. If the stock market does well, your returns could jump to 20% or even 30%. But if it goes down, you still get the guaranteed 14% return for two years. This setup protects you from losses while offering potential gains.
To understand how the company manages this, imagine you give them Rs 100. They put Rs 95 in safe investments that usually earn around 8% to 9% annually. After two years, this Rs 95 grows to about Rs 114, which they give back to you, ensuring you get at least Rs 114 in return.