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IRDA on Monday allowed insurance companies to invest in equity Exchange Traded Funds (ETFs) with certain conditions, a move which would help boost inflows into the country’s stock market.
Only passively managed schemes of the mutual funds which are registered with SEBI and governed by SEBI are eligible, IRDA said in a notification.
ETF is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.
“These schemes are benchmarked and tracked to publicly available index,” it said, adding, these instruments would be listed on at least one exchange which is having connectivity with nationwide terminals.
“Investments ETFs may mitigate the concentration risk and ETFs also offer management of funds with operational convenience,” it said.
Exposure to stocks through ETF would not be reckoned for the overall exposure norms prescribed for individual stocks, it added. The valuation of ETFs shall be in line with the equity shares.
ETFs were introduced in India in 2001. Currently, there are about 33 ETFs with assets under management of close to Rs 11,500 crore held by 6.2 lakh investors. Gold ETFs dominate the market in India.
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