Exchange Traded Funds (ETF) investments in India are witnessing good growth primarily due to transparency, diversification and cost effectiveness. This milestone achieved is the culmination of efforts put in by all stakeholders such as Ministry of Finance (GOI), Ministry of Labour & Employment (GoI), SEBI, EPFO, ETF issuers, Investors, Trading members, etc. In March 2014, the GoI decided to take the ETF route for disinvestment through CPSE ETF.
The Employees’ Provident Fund Organisation (EPFO) started to invest a part of its funds in equities through the ETFs in August 2015. These are significant measures and critical stepping stones for the success of the Indian ETF Industry.
The first ETF was launched in India in December 2001 and was linked to Nifty 50. However, the actual growth in the ETF AUM has happened only in the last five years wherein the AUM of ETFs in India has grown from Rs7,032 crores as on August 31, 2015 to Rs2.07 lakh crores as on August 31, 2020 (annualised growth rate of 97%). During this period, the number of ETFs available in India have also grown from 36 as on August 31, 2015 to 82 as on August 31, 2020.
Nifty 50 is the benchmark index representing the Indian capital markets. Various investment products linked to Nifty 50 index are available for trading and investments in India and globally. Nifty indices have about 77% market share in terms of AUM (Equity & Debt) of the ETF industry in India. Additionally, there are 11 ETFs on Nifty indices that are traded in the international markets.
Vikram Limaye, MD & CEO, NSE said, “We are very encouraged by the investors’ continued confidence demonstrated through their participation in ETFs linked to Nifty 50 and other Nifty Indices. NSE has been on the forefront and has been working actively with the Mutual Fund industry for creating investor awareness and promotion of ETFs through various channels of communication in India. NSE will continue to actively promote ETFs to retail investors through multiple channels. I am confident with the focused efforts of all the stakeholders we would achieve many more milestones in the future.”
Mukesh Agarwal, CEO, NSE Indices Ltd. said, “Nifty 50 and various other Nifty indices have been well accepted and recognized for launching ETFs in India. In addition to Nifty 50, there are 25 other Nifty indices on which ETFs are available in India. NSE Indices believes in product innovation and we will continue to work with various stakeholders in developing new indices, including Debt Indices, to facilitate new ETFs that will offer a variety of investment products to investors.”