Indian ETF story intact, likely to take wings in the next 5 years, says top S&P Dow Jones official

S&P Dow Jones Indices (SPDJI), a global leader in providing benchmark indices to financial markets, is quite bullish over exchange-traded funds (ETFs) taking wings in India in the next five years.

The Indian ETF story will grow by leaps and bounds in the next few years if the Centre were to continue its support and awareness building initiatives of SPDJI to bear fruit, Alka Banerjee, Managing Director, Product Management, SPDJI, told BusinessLine .

“In the next five years, I expect ETFs to be in a completely different space. You can only go up from here. The trajectory is only up,” she said.

It is the government’s support through its large dose of participation in ETFs that has kept the Indian ETF story intact, Banerjee said.

Already, as much as ₹5,800 crore retirement monies have come into ETFs from the Employees’ Provident Fund Organisation (EPFO), which parked 5 per cent of its incremental receipts in this product. So going forward, the popularity of ETFs will be determined more by domestic polices and the stand that the Centre takes than foreign fund inflows, she said.

Inflows to continue “Policy, as we see it, is putting money into equities and that will continue. This is domestic-driven policy and that has little to do with how global markets are doing or global funds are doing,” Banerjee said.

Banerjee also said that SPDJI was conducting lot of education, webinars and working with asset management companies to spread awareness about ETFs and how they work. “The Indian ETF story was non-existent before the government stepped in. Now the government is doing its bit and it is on the right track. Real issues are operational. I don’t think they are about policies. Getting the market makers, and liquidity, are the main issues,” she added.

As on date, the Indian ETF space is tiny. It will get its scale only when retail wakes up to ETFs, which is yet to happen, Banerjee said.

SPDJI has been growing at a good clip in India with over 32 indices launched in the last two years since the company has been around in the Indian market.

Emerging markets Banerjee said this year is going to be tough for emerging markets in general. This is because emerging markets are seen riskier this year.

“India is a bright spot with strong economic growth. Having said that, fund flows tend to follow EMs’ performance. So, there will be some money coming to India, but the trend is get out of EMs and go to safe havens, such as the US,” Banerjee said.

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