New milestone for Indian ETF market! 100th fund listed on NSE

New Delhi: The Indian exchange-traded fund (ETF) market hit another milestone on Monday. The National Stock Exchange (NSE) said the number of ETFs listed on its platform has reached 100, with daily turnover of about Rs 265 crore so far in the current fiscal year.

Note that the first ETF to be listed on the exchange was a fund of Nippon India Mutual Fund (formerly Benchmark Asset Management Company Ltd) in January 2002. The ETF was launched on the Nifty 50 Index and traded on the first day from about Rs 1.30 crore on the NS.

The journey to listing the 100th ETF on NSE took over 19 years. The past year-long period has seen a lot of activity in the ETF space, with 21 ETFs listed on the NSE. Assets under management of ETFs in India now stands at Rs 3.16 lakh crores (end of May 2021), an increase of more than 13.8 times in five years, compared to Rs 23,000 crores (end of April 2016).

According to data available from the World Federation of Exchanges, as of May 2021, the Mumbai-based exchange ranked ninth globally in terms of the number of transactions in ETFs.

Vikram Limaye, MD & CEO, NSE said: “India is a market driven by private investors. Channeling family savings into financial products, which promotes capital formation, has always been one of our main goals. ETFs are a simple and inexpensive investment option, especially for small and novice investors to take exposure to stock markets through participation in the exchanges. Aside from private investors, the participation of provident/pension funds in stock markets through ETFs and the Government of India using ETFs in their divestment programs has provided a major boost to the ETF industry in India.”

“I thank our regulator Securities Exchange Board of India (SEBI) and congratulate all asset management firms that have launched the ETFs, index providers that have provided benchmark indices for the ETFs, trading members and all other stakeholders. Achieving this milestone has been made possible through the support of the whole ecosystem,” he added.

For the uninitiated, ETFs are baskets of stocks, bonds, or other securities listed on an exchange. These funds can be purchased from the market at any time during trading hours.

The Nifty 50 Index remains the most post-popular index and 17 asset managers (AMCs) have launched ETFs on this index. The other popular stock indices on which AMCs have launched ETFs are the Nifty Bank Index and the Nifty Next 50 Index.

With the increasing popularity of ETFs and adoption of passive investment options by investors, AMCs are now seeing increasing traction and have launched ETFs on various themes such as sector ETFs such as Healthcare & Consumption, strategy ETFs on indices such as Nifty50 Value 20index, Nifty 100 Low Volatility 30 Index, Nifty Alpha Low-Volatility 30 Index and Nifty 200 Quality 30 Index, etc.

ETFs are also available on gold. There are 11 ETFs with gold as the underlying asset. Last fiscal year witnessed record attendance, with more than 12 lakh investors transacting in Gold ETFs. The assets under management in gold ETFs have reached Rs 16,624 crores; 2.5 times higher in the past 5 years.

Debt-oriented ETFs in India have assets under management of approximately Rs 40,230 crores and 13 ETFs are listed on NSE with underlying investments in government securities – both central and state government, corporate bonds and money market instruments. The most popular corporate bond ETFs are in the Bharat Bond Index series with assets under management at around Rs 34,000 crores.

The ETFs launched on the Bharat Bond Index had many firsts to their name – First Target ETFs with Public Sector Underlying Corporate Bonds and First Target Maturity ETFs.

There are 60 ETFs available under the Securities Lending and Lending 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, such as the facility available in stocks, index futures, and stock futures.

To encourage participation in equity ETFs, the Government of India has also reduced the Securities Transaction Tax (STT) to just 0.001% which only applies during the sale of the units. Furthermore, STT does not apply to non-equity ETFs.

The average daily turnover of ETFs on NSE was about Rs 265 crores in the current fiscal year. The number of investors transacting in ETFs also increased 96% from 20.4 lakhs in FY20 to 40.1 lakhs in FY21. The first 3 months of FY22 have already seen trades by over 22 lakh investors.