30-07-2014, 02:51 PM
GROWTH AND PERFORMANCE OF EXCHANGE TRADED FUND IN INDIAN STOCK MARKET
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ABSTRACT
This paper evaluates the growth and performance of Exchange Traded Fund in India. Assets in ETFs are having continued grow at larger. ETFs was developed by four ways likely Equity, Debt, Gold and World Indices. Growth and performance of ETFs are larger piece of investment pie. ETFs which yet to make their mark in India despite their low costs, tax efficiency and stock.
INTRODUCTION
Exchange traded funds are new investment products. Exchange traded funds are generally index based funds that allow investors to buy or sell exposures to an index through a single financial instrument. Similar to equity securities, exchange traded funds are traded on a stock exchange through a broker. Exchange traded fund funds can be traded at any time during market hours, sold shortly. Exchange traded funds are shares of portfolio and not an individual company
GOLD
A gold exchange-traded fund (or GETF) is an exchange-traded fund (ETF) that aims to track the price of gold. Gold ETFs are units representing physical gold which may be in paper or dematerialised form. These units are traded on the Exchange like a single stock of any company. Gold ETF's are intended to offer investors a means of participating in the gold bullion market without the necessity of taking physical delivery of gold, and to buy and sell that participation through the trading of a security on a stock exchange.
WORLD INDICES
Exchange Traded Funds (ETF) that have as their underlying tracking instrument an index or other financial product focused on a single country. They are usually well diversified and designed to reflect the overall economic condition of the country itself. The underlying index chosen is often the major index of the principal exchange within the country.
Hang Seng Bees - First International Exchange Traded Fund (ETF) in India. The investment objective of Hang Seng Bees is to provide returns that, before expenses, closely correspond to the total returns of securities as represented by Hang Seng Index of Hang Seng Data Services Limited, by investing in the securities in the same proportion as in the Index. However, the performance of Scheme may differ from that of the Underlying Index due to tracking error.
N100 - MOST SHARES N100 ETF – objective: - The Scheme seeks investment return that corresponds (before fees and expenses) generally to the performance of the NASDAQ-100 Index
PERFORMANCE OF ETF
ETFs have been marketed as a low- cost alternative to the traditional mutual funds and have always been characterized by their low management fees, low expense ratios and flexibility in buying and selling. Benchmark Mutual Fund AMC was the key player in bringing ETFs to the Indian markets and popularizing them among the investors. Most of the ETFs that have been launched in India are Index exchange traded funds. Though different types of innovative ETFs have been introduced in India, the participation by investors in these ETFs markets because of the poor performance of many of the ETFs. The assets under management of ETFs are less than 1% of the total mutual funds asset base. Compared to the growth and market presence of ETFs in developed markets, such as in the US and Europe, Indian capital markets have failed to make their mark in ETFs arena.
The only products which have been well received in India are gold ETFs because of their innovative design and flexibility as investment vehicles. Prior to the introduction of gold ETFs there was no proper instrument available to the investor to invest in the gold market, except investing in physical gold bars, which did not have proper market for buying and selling. Further, Gold ETFs are gaining popularity as there is no cost of storage. Many mutual funds houses have rushed to launch gold ETFs because of their rising acceptance among Indian investors. At present there are 14 gold ETFs in the Indian markets and number of other mutual funds is also planning in launch their own gold ETFs to capture the growing markets.
CONCLUSION
The growth and performance of ETFs can be mainly attributed to the index ETFs as they provide the advantage of low costs, flexibility and transparency over conventional index mutual funds. However index funds are not that popular in India because most of the portfolio managers are still finding positive alphas in this emerging market. Once the Indian stock markets become efficient, the concept of indexation and index ETFs will become popular.