Equity-based exchange-traded funds (ETFs) have seen a huge surge in volume in the last decade, indicating an ever growing investor interest in capital markets, especially among retail investors. From less than a crore a day, the daily average value in ETF has surged to around Rs70 crores in 10 years on the National Stock Exchange. During the period, ETF based on Nifty has given around 15% return. Some of the other ETF like CPSE ETF value has doubled in less than a year.
An ETF is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs can be bought with an miniscule investment of less than Rs 100 and are a highly retail investor friendly instrument. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund units, making them an attractive alternative for individual investors.
“ETF is a wonderful product for retail investors in particular. Over the years, ETF s based on NIFTY and others have given investors a good return. Globally people look forward to such products and currently NSE offers 42 ETFs,” says Mr Ravi Varanasi, Chief, Business Development, National Stock Exchange. Some of the popular ETFs traded on the NSE platform are NSE Nifty, NSE Gold ETF, Bank Nifty, CPSE ETF and NSE GSEC 10 among others.
In Equity ETF, for instance, the Retail and HNI portion of the AUM has increased by 50% from an AUM of Rs 1102 crores in March 2014 to an AUM of Rs 1656 Crores in March 2015 on the NSE platform. Equity ETFs have shown a jump of 2.5 times in daily average turnover from Rs 7.8 Crores in Q3 of 14-15 as compared to Rs 19.75 Crores in Q4 of 14-15. NSE’s IISL has launched a lot of new ETF in the current quarter already like Reliance MF has recently launched an ETF on NV20 (NV 20 is a strategy index comprising 20 value stocks from Nifty 50) and a lot of ETFs are in the pipeline with some of the existing AMCs applying for ETFs on different Indices.
