ETFs catch on, daily average value on NSE up 70 times

An ETF is a marketable security that tracks an index, a commodity, bond or a basket of assets like an index fund.

In a sign of growing retail interest in exchange-traded funds, daily average trading value in such securities on National Stock Exchange has surged to about Rs 70 crore (Rs 700 million) from less than Rs 1 crore (Rs 10 million) over the past 10 years.

An ETF is a marketable security that tracks an index, a commodity, bond or a basket of assets like an index fund.

Unlike mutual funds, an ETF trades like a common stock on a stock exchange.

"From less than a crore a day, the daily average value in ETF has surged to around Rs 70 crore in 10 years (since 2005) on the exchange," the National Stock Exchange said.

According to the exchange, equity-based ETFs have seen a sharp jump in volumes in the past decade, which is indicative of ‘an ever-growing investor interest in capital markets, especially among retail investors’.

Besides, CPSE ETFs' average trading value has doubled in less than a year, it added.

ETFs can be bought with a minuscule investment of less than Rs 100 and are a highly retail investor-friendly instrument, NSE said.

ETFs experience price changes throughout the day as they are bought and sold. They typically have a higher daily liquidity and lower fees than mutual fund units, making them an attractive alternative for individual investors.

"ETF is a wonderful product for retail investors in particular.

“Over the years, ETFs based on Nifty and others have given investors good returns," NSE Business Development chief Ravi Varanasi said.

In the past 10 years, ETF-based equities have given about 15 per cent returns.

Currently, NSE offers 42 ETFs, which include NSE Nifty, NSE Gold ETF, Bank Nifty, CPSE ETF and NSE GSEC 10.      

The retail and HNIs (high net worth individuals) portion of the asset under management on the NSE platform has increased by 50 per cent to Rs 1,656 crore (Rs 16.56 billion) in March 2015 from a year ago.

Equity ETFs have seen a jump of 2.5 times in daily average turnover to Rs 19.75 crore (Rs 197.5 million) in the March quarter of 2014-15 compared with Rs 7.8 crore (Rs 78 million) in the preceding one.

Image: The National Stock Exchange. Photograph: Rediff Archives