January 30, 2023

Nippon India ETF Nifty BeES, India’s first exchange-traded fund, has crossed Rs 10,000 crore in belongings. The scheme is part of MC30, Moneycontrol’s curated basket of mutual fund schemes you possibly can spend money on. However it’s not simply the scale that makes the scheme price your cash

October 26, 2022 / 09:02 AM IST

Nippon India ETF Nifty 50 BeES (Nifty BeES), India’s first-ever ETF scheme, has achieved a milestone of Rs 10,000 crore of Belongings Below Administration (AUM) just lately. Nifty BeES is the third largest Nifty 50 ETF in India adopted by SBI Nifty 50 ETF and UTI Nifty 50 ETF. Whereas SBI Nifty 50 ETF and UTI Nifty 50 ETF grew their asset base primarily because of the influx from EPFO, Nifty BeES gained its belongings from the retail and excessive netwoth particular person (HNI) buyers. It is usually part of the MC30; Moneycontrol’s curated basket of 30 funding worthy mutual fund schemes. Nifty BeES tracks the Nifty 50 index (N50). N50 is a well-diversified 50-stock index and represents necessary sectors of the financial system. In accordance with NSE India, N50 covers 13 sectors and represents about 66.8 p.c of the free float market capitalisation of the shares listed on NSE as on March 29, 2019.

Nifty BeES was launched by Benchmark AMC in December 2001. “When it was launched, it was looked at, as an alien. Nobody wanted returns that mimicked an index. People wanted funds to outperform markets. Popularising ETFs was a huge challenge. But from that time till now, Nifty 50 BeES has grown; in terms of volume, assets, number of investors. From just Rs 2 crore in 2002 and Rs 408 crore in March 2010, Nifty BeES has now grown to Rs 10,000 crore mark in October 2022”, said Hemen Bhatia, head, ETF, Nippon Life India Asset Management Company (AMC).

Nifty BeES was launched by Benchmark AMC in December 2001. “When it was launched, it was checked out, as an alien. No person needed returns that mimicked an index. Folks needed funds to outperform markets. Popularising ETFs was an enormous problem. However from that point until now, Nifty 50 BeES has grown; by way of quantity, belongings, variety of buyers. From simply Rs 2 crore in 2002 and Rs 408 crore in March 2010, Nifty BeES has now grown to Rs 10,000 crore mark in October 2022”, stated Hemen Bhatia, head, ETF, Nippon Life India Asset Administration Firm (AMC).

Indian ETF market has been dominated by the institutional investors. As per the AMFI’s latest data, About 91 percent of the AUM of overall ETFs (other than gold) came from the institutional investors. Retail and HNI comprised the share of only 1.8% and 6.5% respectively. But Nifty BeES is different. It attracted individual investors. According the Nippon India AMC, out of the average AUM of Nifty BeES, retail and HNI held the share of 13% and 45% respectively. Post the pandemic, many first time retail investors who wanted to taste the equity market preferred the Nifty BeES, according to market experts.

Indian ETF market has been dominated by the institutional buyers. As per the AMFI’s newest knowledge, About 91 p.c of the AUM of general ETFs (aside from gold) got here from the institutional buyers. Retail and HNI comprised the share of only one.8% and 6.5% respectively. However Nifty BeES is totally different. It attracted particular person buyers. In accordance the Nippon India AMC, out of the common AUM of Nifty BeES, retail and HNI held the share of 13% and 45% respectively. Put up the pandemic, many first time retail buyers who needed to style the fairness market most popular the Nifty BeES, in accordance with market specialists.

One of the other reasons why passively-managed funds became popular in India is that increasingly large-cap actively-managed funds found it together to beat market indices, such as Nifty 50 and Nifty 100 index (N100). Especially so, after the capital market regulator Securities and Exchange Board of India (SEBI) recategorised mutual funds, made market capitalisation criteria and mutual fund categories, standardized. Benchmarking to total return index (TRI) and rationalization of expense ratios- another SEBI initiative- made things tougher. Investors started preferring the passive funds that track N50 such as Nifty BeES as they deliver market return with lower expense ratio.

One of many different explanation why passively-managed funds turned common in India is that more and more large-cap actively-managed funds discovered it collectively to beat market indices, equivalent to Nifty 50 and Nifty 100 index (N100). Particularly so, after the capital market regulator Securities and Trade Board of India (SEBI) recategorised mutual funds, made market capitalisation standards and mutual fund classes, standardized. Benchmarking to whole return index (TRI) and rationalization of expense ratios- one other SEBI initiative- made issues harder. Buyers began preferring the passive funds that observe N50 equivalent to Nifty BeES as they ship market return with decrease expense ratio.

Over the long run, the Nifty 50 index has delivered notable returns. Performance as measured by 10-year rolling returns calculated over the last 20 years shows that Nifty 50 Total Returns Index delivered a compound annual growth of 13 percent.

Over the long term, the Nifty 50 index has delivered notable returns. Efficiency as measured by 10-year rolling returns calculated over the past 20 years reveals that Nifty 50 Complete Returns Index delivered a compound annual progress of 13 p.c.

N50 constitutes the top 50 giant blue-chip stocks that are financially strong and have the potential to grow. Since they are well-established businesses, they may grow at a slower pace than newer kids on the block, but can deliver consistent returns. They can also cope with market falls relatively well. The above drawdown chart exhibits that the N50 not only corrected less in market corrections but also recovered faster in comparison to mid- and smallcap counterparts, helping deliver a balanced return. Nifty BeES can be a suitable option for the young investors who want to taste the equity markets.

N50 constitutes the highest 50 large blue-chip shares which can be financially sturdy and have the potential to develop. Since they’re well-established companies, they might develop at a slower tempo than newer youngsters on the block, however can ship constant returns. They will additionally address market falls comparatively nicely. The above drawdown chart reveals that the N50 not solely corrected much less in market corrections but in addition recovered sooner compared to mid- and smallcap counterparts, serving to ship a balanced return. Nifty BeES generally is a appropriate possibility for the younger buyers who need to style the fairness markets.

Limited liquidity has been a cause of concern in the Indian ETFs landscape for years. However, the Nifty BeES has been the most actively traded equity ETF in India, touching its record mark of a single-day traded volume of Rs 351 crore on the NSE in March 2022. Nifty BeES has comprised about three-fourth of the total traded volume of overall Nifty 50 ETFs. Bhatia of Nippon Life India AMC says, “We have seen increased participation across investor categories such as retail, HNIs (high net-worth individuals) and family offices since the onset of COVID, leading to a massive rise in volumes.” Higher liquidity helps investors to buy the units of ETFs at the desired price, leading to lower impact cost. Higher liquidity also results in narrowing bid-offer spreads. For instance, the impact cost for Nifty BeES on NSE was 0.03 percent (October 21, 2022). This lead to lower total cost ownership (TCW) of the ETF units.

Restricted liquidity has been a explanation for concern within the Indian ETFs panorama for years. Nonetheless, the Nifty BeES has been probably the most actively traded fairness ETF in India, touching its report mark of a single-day traded quantity of Rs 351 crore on the NSE in March 2022. Nifty BeES has comprised about three-fourth of the entire traded quantity of general Nifty 50 ETFs. Bhatia of Nippon Life India AMC says, “We’ve got seen elevated participation throughout investor classes equivalent to retail, HNIs (excessive net-worth people) and household workplaces because the onset of COVID, main to an enormous rise in volumes.” Larger liquidity helps buyers to purchase the items of ETFs on the desired worth, resulting in decrease influence price. Larger liquidity additionally ends in narrowing bid-offer spreads. For example, the influence price for Nifty BeES on NSE was 0.03 p.c (October 21, 2022). This result in decrease whole price possession (TCW) of the ETF items.

Among the Nifty 50 ETFs, Nifty BeES scores well on all parameters including lower tracking error, lower expense ratio and higher traded volume.

Among the many Nifty 50 ETFs, Nifty BeES scores nicely on all parameters together with decrease monitoring error, decrease expense ratio and better traded quantity.

Dhuraivel Gunasekaran

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