Exchange Traded Funds(ETFs)

ETFs are essentially index funds that are listed on an exchange and track the price performance of the target index closely. The ETF trading value is based on the net asset value (NAV) of the underlying stocks in the target index. E.g., a Nifty ETF will look to replicate CNX Nifty returns.

ETFs are popular world over with nearly 60% of trading volumes on the American Stock Exchange (AMEX) captured by all types of ETFs. At the end of June 2011, the global ETF industry comprised 2,825 ETFs from 146 providers on 49 exchanges around the world with total assets of US$1.49 trillion (Source: www.ifaonline.co.uk).

The ETF advantage
  • Trade like stocks - You can buy and sell an ETF during market hours on a real time basis as well as put advance orders on purchase such as limits or stops. In case of conventional mutual funds, purchase or sale can be done only once a day after the fund NAV is calculated.
  • Low cost of investment - The passive investment style with low turnover helps keep costs low. ETFs are known to have among the lowest expense ratios compared to others schemes.
  • Diversification benefit - In case of Nifty ETF, you own the complete basket of 50 stocks and remain diversified.
  • Simple and transparent - The underlying securities are known and quantities are pre-defined (In case of conventional mutual fund schemes, one needs to wait for the monthly factsheet). No form filling is required if you transact in the secondary market. Investment can be made directly from the fund house or the exchange.
  • Supports small ticket investments - ETFs are a great tool for investors wanting to start with a small corpus. The minimum ticket size is 1 unit (in case of IIFL Nifty ETF, 1 unit is approximately 1/10th of Nifty level, i.e Rs500, when Nifty is at 5000). Premium and discount also tends to be higher in the futures segment, than in ETFs.
  • ETFs are taxed like stocks - Investors can take advantage of special rates for short term and long-term capital gains.
Target audience
  • Long term investors
  • First time investors
  • Investors looking for a low cost diversified portfolio
  • Traders who do not have enough capital to invest in index futures
  • Institutional investors looking to temporarily park cash during portfolio transition
  • Arbitrageurs to carry out operations with low impact cost
Concept of tracking error

The extent to which the NAV of the scheme moves in a manner inconsistent with the movements of the underlying Index on any given day or over any given period of time due to any cause or reason whatsoever including but not limited to expenditure incurred by the scheme, dividend payouts if any, all cash not invested at all times as it may keep a portion of funds in cash to meet redemption, purchase price different from the closing price of securities on the day of rebalance of Index, etc.

Points to note before investing in ETFs
  • Invest in ETFs with ample secondary market liquidity - Fund houses do depend on market makers and arbitrageurs to maintain liquidity to keep the price in line with the actual NAV.
  • ETFs track the target index – Any investor wanting an exposure to a particular target index like Nifty will do well by investing in ETFs. The objective of ETF is to be the index rather than beat the Index.
  • Always invest in key benchmarks ETFs rather than sectoral funds - Investing in sectoral ETFs is prone to higher volatility compared to key benchmark ETFs like Nifty.
  • Cost of trading on the exchange - Investor will have to bear the cost of brokerage and other applicable statutory levies e.g, Securities Transaction Tax, etc, when the units are bought or sold on the stock exchange.
ETF Performance
Scheme Name AUM(Rs.in Cr) NAV(Rs.) 1w % 3m % 6m % 1y % 3y % Since Incp.
Kotak PSU Bank ETF 21.37 334.72 [4.07] [3.13] 9.10 59.16 16.76 2.78
R* Shares PSU Bank BeES 58.43 363.57 [4.07] [3.13] 9.03 58.92 16.79 3.69
CPSE ETF 1,422.04 27.90 [0.34] 13.16 19.63 49.44 0 17.59
Edelweiss ETF - Nifty Bank 1.09 2,066.88 1.67 7.62 7.84 46.62 0 21.71
SBI ETF Nifty Bank 376.93 208.64 1.67 7.61 7.81 46.58 0 6.15
Kotak Banking ETF 1,903.93 208.63 1.67 7.61 7.79 46.56 0 4.81
R* Shares Bank BeES 878.60 2,076.90 1.66 7.53 7.64 46.07 26.36 20.06
SBI ETF Nifty Next 50 1.95 247.17 0.23 14.59 7.17 42.36 0 12.93
R* Shares Junior BeES 64.47 244.69 0.21 14.33 6.64 40.97 26.97 23.51
R* Shares Dividend Opportunities ETF 14.05 24.27 [0.54] 13.14 7.87 37.73 0 12.88
Motilal Oswal MoSt Shares Midcap 100 ETF 25.51 16.78 [0.33] 12.82 7.24 37.04 29.17 13.39
SBI BSE 100 ETF 1.19 93.55 0.35 9.95 3.39 28.52 0 3.90
R* Shares Infra BeES 9.66 305.92 [0.72] 11.46 3.88 28.04 10.67 [3.27]
R* Shares Hang Seng BeES 3.72 2,438.38 2.15 6.44 5.97 27.41 7.51 10.23
ICICI Pru Nifty 100 iWIN ETF 28.25 94.99 0.32 9.77 3.19 27.28 16.18 18.17
Edelweiss ETF - Nifty 50 6.81 9,141.22 0.35 10.03 3.78 27.21 0 6.34
R* Shares CNX 100 ETF 6.88 92.77 0.31 9.86 3.03 26.88 15.80 14.06
Motilal Oswal MoSt Shares NASDAQ-100 ETF 63.53 352.29 2.03 8.94 10.66 26.12 15.81 22.96
SBI ETF Nifty 50 10,036.02 89.76 0.35 9.27 2.66 25.85 0 2.49
UTI-Nifty ETF 450.59 899.82 0.36 9.33 2.74 25.81 0 10.27
Invesco India Nifty ETF 1.47 911.81 0.35 9.22 2.63 25.77 14.25 9.85
ICICI Pru Nifty iWIN ETF 711.95 89.74 0.35 9.24 2.66 25.72 14.47 13.06
Kotak Nifty ETF 442.90 893.22 0.35 9.24 2.62 25.70 14.56 10.07
HDFC Nifty ETF 48.64 892.84 0.35 9.27 2.67 25.70 0 14.41
LIC MF ETF NIFTY 345.57 89.08 0.35 9.23 2.64 25.65 0 10.60
Quantum Index Fund (G) 3.85 945.57 0.35 9.22 2.56 25.54 14.39 10.66
Birla Sun Life Nifty ETF 172.81 93.18 0.33 9.08 2.66 25.50 14.49 9.75
R* Shares Nifty BeES 663.52 900.37 0.34 9.12 2.40 25.19 14.26 16.25
Motilal Oswal MOSt Shares M50 ETF 20.23 84.77 0.31 8.76 1.89 24.23 14.93 7.03
HDFC Sensex ETF 15.52 2,895.27 0.50 8.64 2.11 24 0 13.10
SBI ETF SENSEX 2,957.61 301.17 0.51 8.63 2.04 23.50 13.32 12.94
R* Shares Sensex ETF 36.06 293.78 0.50 8.59 2.08 23.47 0 3.89
LIC MF ETF Sensex 263.94 288.95 0.51 8.60 2.03 23.45 0 8.55
UTI-Sensex ETF 90.87 289.90 0.51 8.70 2.19 23.42 0 8.41
Kotak Sensex ETF 10.85 292.70 0.50 8.57 1.94 23.28 12.87 8.26
ICICI Pru Sensex iWIN ETF 27.00 294.18 0.48 8.54 2.06 23.17 12.94 17.43
R* Shares Consumption ETF 15.33 40.24 [0.50] 12.95 0.20 22.63 0 15.30
Kotak NV 20 ETF 1.66 39.05 0.74 8.32 2.61 21.49 0 10.49
R* Shares NV20 ETF 13.96 391.87 0.73 8.28 2.64 21.37 0 3.18
R* Shares Shariah BeES 1.16 200.99 0.27 10.46 2.05 19.48 12.48 14.29
LIC MF G-Sec Long Term ETF 77.68 16.39 [0.09] [1.94] 3.22 13.05 0 9.75
R* Shares Liquid BeES 791.14 1,000.00 0 0 1.20 4.09 6.33 6.13
Canara Robeco Gold ETF 68.36 2,766.44 0.72 [1.48] [6.58] 2.40 [2.39] [0.30]
IDBI Gold ETF 83.54 2,837.65 1.50 [0.36] [8.14] 0.05 [0.35] [0.42]
LIC MF ETF Nifty 100 229.78 91.73 0.32 10.05 3.32 0 0 20.67
Birla Sun Life Sensex ETF 19.88 285.51 0.50 8.52 2.03 0 0 3.06
R* Shares Long Term Gilt ETF 20.39 16.47 [0.09] [1.88] 3.30 0 0 6.92
SBI ETF 10 Year Gilt 2.06 157.87 [0.16] [1.33] 4.34 0 0 8.42
IDFC Sensex ETF 1.75 284.98 0.51 8.61 0 0 0 1.56
IDFC Nifty ETF 1.87 88.27 0.33 9.15 0 0 0 1.49
ICICI Pru Midcap Select iWIN ETF 7.26 57.82 [0.03] 12.60 3.58 0 0 14.31
Edelweiss ETF - Nifty Quality 30 4.66 222.14 [0.45] 8.84 [1.03] 0 0 7.37
ICICI Pru NV20 iWIN ETF 6.61 38.63 0.73 8.21 2.66 0 0 5.29
UTI-Gold ETF 425.51 2,715.31 1.51 [0.47] [7.84] [0.08] [0.44] 11.20
ICICI Pru Gold iWIN ETF 114.52 279.59 1.49 [0.55] [8.30] [0.20] [0.51] 6.20
R* Shares Gold BeES 1,747.96 2,707.05 1.39 [0.71] [7.94] [0.29] [0.39] 11.20
Invesco India Gold ETF 39.99 2,790.07 1.49 [0.53] [7.87] [0.32] [1.57] 7.55
Birla Sun Life Gold ETF 75.12 2,831.65 1.49 [0.55] [7.93] [0.36] [2.26] 4.23
HDFC Gold ETF 528.41 2,755.45 1.49 [0.55] [7.91] [0.38] [0.59] 6.14
SBI ETF Gold 869.48 2,774.85 1.49 [0.56] [7.95] [0.38] [0.47] 8.39
Kotak GOLD ETF 469.34 269.84 1.50 [0.57] [8.40] [0.42] [0.59] 12.26
Quantum Gold Fund (G) 59.45 1,347.73 1.50 [0.56] [7.97] [0.51] [0.55] 9.13
AXIS Gold ETF 208.10 2,709.75 1.32 [2.14] [9.44] [2.02] [1.12] 4.89
 
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