NSE Hits A Century – 100th ETF Listed On The Platform3 min read
One of India’s largest stock exchanges NSE reportedly said that the number of Exchange Traded Funds listed on the platform has reached a century with a daily turnover of Rs. 265 cr in the current financial year.
Exchange-Traded Funds (ETFs) are innovative investment options that combine the features of stocks and mutual funds. Like stocks, they are listed on exchanges – NSE & BSE and can be traded through during open market hours. Similarly, like mutual funds, Exchange Traded Funds offers investors access to a diversified portfolio that spans across the strategic sectors of the economy.
As per the World Federation of Exchanges data, NSE is ranked ninth globally in terms of the number of trades in ETFs as of May 2021.
History Of ETFs And Its Key Growth Drivers
Benchmark Mutual Fund (now Nippon India Mutual Fund) was the pioneer in ETFs in India. In 2001, the country witnessed its first Exchange Traded Fund – the benchmark Nifty 50 ETF (Nifty BeES).
It got listed on the NSE and tracked the Nifty 50 Index. Nifty BeES was a revolutionary avenue at that time in the sense that with a single effort investors could gain exposure to the whole index and maintain a diversified portfolio without any active fund manager and at a very low cost.
The ETF was launched on the Nifty 50 Index, and Day 1 witnessed trading of around Rs. 1.30 crore on the exchange.
Growth of ETFs In India
Assets under management (AUM) of ETFs in India stand at Rs.3.16 lakh crore (end of May 2021), which is nearly 14 times increase in five years compared with Rs.23,000 crores (end of April 2016).
With the surge in the stock market and new investors, the number of investors transacting in ETFs on NSE has also gone up by 96% to 4.01 million in FY21 from 2.04 million in FY20.
As per the media reports, “The first three months of FY22 has already seen transactions by more than 22 lakh (2.2 million) investors.”
Much of the ETF growth can be attributed to equity and debt ETFs as against Gold ETFs. The share of gold ETFs in the total ETF composition remained high from 2009 (51%) to 2013 (88%), while the other ETFs (equity & debt) were still gaining momentum (Source: AMFI data). The high levels of uncertainty plugged by the global credit crisis of 2008 made people pool most of their assets into gold ETFs as a safe haven.
From 2014 onwards, the share of other ETFs (equity & debt) picked up steam and went from 39% (2014) of total ETF AUM to as high as 93% in 2020. (Source: AMFI data)
Way Forward
The underperformance of over 90% of active mutual funds in the large-cap category as per SPIVA report 2018 has perked up investors’ interests in passive funds.
Then, the extensive efforts of SEBI and AMCs towards spreading ETF education and awareness are growing a community of DIY investors who would be looking for wealth creation opportunities in ETFs.
Besides, the government’s efforts to position an ETF like Bharat-22 as a tax-efficient avenue along with a core part of their divestment activities to raise capital would be the key tailwind for the growth of ETFs in the future. Nippon India ETF Gold BeES and Bharat Bond ETF, among others, are some of the largest ETFs in India.
If you are looking for low-cost passive investment options over the long term & face a paucity of time to track markets closely, then ETFs are good avenues to create wealth for achieving your financial goals.
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