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Insurers can invest in equity ETFs: IRDA

The objective is to attract investments into equity market in India

March 05, 2014 8:50 IST | India Infoline News Service
The Insurance Regulatory and Development Authority (IRDA) on Monday has allowed insurance companies to invest in equity exchange traded funds (ETFs) subject to certain conditions.
The objective is to attract investments into equity market in India.
Only passively managed schemes of the mutual funds, which are registered with SEBI and governed by SEBI are eligible, the IRDA said in a notification.
ETF is a security that tracks an index, a commodity or a basket of assets such as an index fund, but trades like a stock on an exchange.
“These schemes are benchmarked and tracked to publicly available index,” it said.
The IRDA further said that these instruments would be listed on at least one exchange, which is having connectivity with nationwide terminals.
“Investments ETFs may mitigate the concentration risk and ETFs also offer management of funds with operational convenience,” it said.
 The Overall Expense Ratio shall be less than 0.50% of the daily net assets of the scheme.
Exposure to stocks through ETF would not be reckoned for the overall exposure norms prescribed for individual stocks, it added.
The valuation of ETFs shall be in line with the equity shares.

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