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Market participants’ interest in exchange traded funds (ETFs) has increased substantially since the first quarter of this fiscal, reflecting their optimism in the Indian economy.
The positive economic outlook after the Narendra Modi Government took over in June has played a crucial part in increased investor interest, especially in equity-based ETFs. The initiative to roll out ETFs around Central Public Sector Enterprises (CPSEs) also helped boost interest, say industry observers.
The daily average gross turnover on ETFs (both equity and gold-based) at the NSE in April-June zoomed to ₹74.06 crore, against ₹28.24 crore in January-March 2014.
The number of clients who traded in ETFs on the NSE — the country’s largest bourse — also surged to 1.41 lakh during April-June, against 83,294 in January-March.
The expectation that the bull-run in equities is here to stay has added to investor interest in ETFs in Q1, say capital market observers.
However, ETFs still represent only 1.5 per cent of all mutual fund assets and more work needs to be done in promoting their benefits and educating investors, John Davies, Vice-President, Global Exchange Traded Products, S&P Dow Jones Indices, told BusinessLine .
As of end July, there were 42 ETFs in India with $2.5 billion in assets from 15 providers listed across two exchanges.
Currently, in India, two of the top five ETFs by assets are equity-based.
“The CPSE ETF managed by Goldman Sachs alone accounted for 30 per cent of the total assets worth $698 million, which is impressive as it was listed only in April this year,” Davies said.
In the first seven months of 2014, equity ETFs have seen net inflow of $109 billion, of which $9.5 billion was allocated to emerging markets, said Davies. He, however, said it was difficult to break down the percentage allocated to Indian equities.
Allocations to India in global portfolios had increased on the back of positive reactions to local developments, he added.
“Purely India equity-focused ETFs attracted over $2 billion in net new assets in the first seven months of 2014,” Davies said.
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