If you want to get and sell mutual fund units for the duration of the trading hours of stock exchanges, there are Exchange Traded Funds (ETFs) that exist as an option investment alternative for investors. ETFs are listed and traded on stock exchanges like stocks and normally track a certain index. The initially ETF was launched on January 8, 2002 by Nippon India Mutual fund (erstwhile Benchmark Asset Management Company Ltd) with the Nifty 50 Index as the benchmark.
As per NSE, one hundred ETFs have been listed so far, with 21 ETFs receiving listed on NSE in the last one year. The assets below management of ETFs in India are now at Rs. 3.16 lakh crore (finish of May 2021), witnessing more than 13.8 instances increase in 5 years, as compared to Rs 23,000 crore (finish of April 2016).
ETF is a sort of variant of a mutual fund and tracks a certain index. The units in an ETF can be purchased or sold only on a stock exchange anytime for the duration of the trading hours. ETFs are low-price investments and permit one to take exposure to a number of stocks of the exact same index at one time. They come in several types and normally track various indexes and sectors.
And not just equities, there are gold ETF and even international ETF’s listed on the stock exchanges.
The Nifty 50 Index continues to be the most well-known index and 17 asset management providers (AMCs) have launched an ETF on this index. The other popular equity indices on which AMCs have launched ETFs include Nifty Bank Index and Nifty Next 50 index.
With the growing reputation of ETFs and acceptances of passive investment choices by investors, AMCs are now seeing an increasing traction and have been launching ETFs on various themes such as sectoral ETFs like Healthcare & Consumption, approach ETFs on indices such as Nifty50 Value 20 index, Nifty one hundred Low Volatility 30 Index, Nifty Alpha Low-Volatility 30 Index, and Nifty 200 Quality 30 Index, and so forth.
ETFs are also out there on Gold. There are 11 ETFs with the underlying assets as Gold. Last economic year witnessed a record participation, with more than 12 lakh investors transacting in Gold ETFs. The Assets below management in Gold ETFs has touched Rs. 16,624 crores 2.5 instances increase in the last 5 years.
Debt oriented ETFs in India have assets below management of about Rs 40,230 crores and 13 ETFs are listed on NSE with underlying investments in Government securities – Central Government as effectively as State Government, Corporate Bonds and dollars market place instruments.
Motilal Oswal Nasdaq one hundred ETF tracks the overall performance of the NASDAQ-one hundred Index, providing international exposure to your portfolio. The Nippon India ETF Hang Seng BEES tracks the Hang Seng Index by investing in the Securities in the exact same proportion as in the index.
The most well-known corporate bond ETFs are on the Bharat Bond Index series with assets below management of about Rs. 34,000 crores. The ETFs launched on Bharat Bond index had several firsts to its credit – First ETFs with underlying as the public sector enterprises corporate bonds and First Target maturity ETFs.
To encourage participation in equity ETFs, Government of India has also decreased securities transaction tax (STT) to just .001% applicable only for the duration of promoting of the units. Further, STT is not applicable to the non-equity-oriented ETFs.
The typical day-to-day turnover of ETFs on NSE stood at around Rs. 265 crores in the existing economic year. The quantity of investors transacting in ETFs has also gone up by 96% from 20.4 lakhs in FY20 to 40.1 lakhs in FY21. The initially 3 months of FY22 has currently seen transactions by more than 22 lakh investors.