AMCs are now seeing increasing traction and have been launching ETFs on different themes
Exchange-Traded Funds (ETFs), started in 2002, are grabbing the investor’s attention with the leading stock exchange NSE witnessing listing of 100th such instruments.
The first ETF by Nippon India Mutual Fund (erstwhile Benchmark Asset Management Company Ltd) was launched in India on the Nifty 50 Index. Listed on the NSE on January 8, 2002, it witnessed trading of Rs 1.30 crore on day one, the bourse said in a statement on Monday.
The journey to listing the 100th ETF on the NSE took more than 19 years. The last one-year period has seen a lot of activity in the ETF space, with 21 ETFs getting listed on the NSE.
The assets under management of ETFs in India stood at Rs 3.16 lakh crore at the end of May 2021, more than 13.8 times growth in five years as compared to Rs 23,000 crore as of end-April 2016.
"India is a retail investor-driven market. Channelising household savings into financial products which aids capital formation has always been one of our key objectives," Vikram Limaye, MD and CEO, NSE, said.
According to him, exchange-traded funds with their low-cost investment funds pave a path for the small and first-time investors to get introduced to equity markets through participation on the stock exchanges.
Apart from retail investors, participation of provident or pension funds in equity markets through ETFs and Government of India using ETFs for their disinvestment programmes have given a big boost to the ETF industry in India, he added.
The exchange said that the Nifty 50 Index continues to be the most popular index as 17 Asset Management Companies (AMCs) have launched an ETF on this index. The other popular equity indices on which AMCs have launched ETFs include Nifty Bank Index and Nifty Next 50 index.
With the increasing popularity of ETFs and acceptances of passive investment options by investors, AMCs are now seeing increasing traction and have been launching ETFs on different themes such as healthcare and consumption, strategy ETFs on indices such as Nifty 50 Value 20 index, Nifty 100 Low Volatility 30 Index Nifty Alpha Low-Volatility 30 Index, and Nifty 200 Quality 30 Index.
In addition, ETFs are also available on gold and there are 11 ETFs with the underlying assets as yellow metal. Last financial year witnessed record participation, with more than 12 lakh investors transacting in gold ETFs.
Further, debt-oriented ETFs have assets under management of about Rs 40,230 crore, and 13 ETFs are listed on the NSE with underlying investments in government securities -- central government as well as state government, corporate bonds, and money market instruments.
There are 60 ETFs available under the securities lending and borrowing scheme, where investors can lend or borrow the ETF units. Cross margin to index-based exchange-traded funds benefit is also available on some of the ETFs like the facility available in the equity stocks, index futures and stock futures, the exchange said.
The government is encouraging participation in equity ETFs by reducing securities transaction tax (STT) to just 0.001 per cent applicable only during the selling of the units. Further, STT is not applicable to non-equity-oriented ETFs.
The average daily turnover of ETFs on NSE stood at around Rs 265 crore in the current financial year. The number of investors transacting in ETFs has also gone up by 96 per cent from 20.4 lakh in 2019-20 to 40.1 lakh in 2020-21. The first three months of the ongoing fiscal have seen transactions by more than 22 lakh investors.