Skip to main content

Domestic ETF market set for a boost

By
Move to allow EPFO and other pension money through this route seen as trigger; fund houses smell big opportunity
The domestic exchange traded fund ( ETF) market is set for a boost, with entry of pension money into equities being allowed through this route, putting renewed focus on this investment vehicle.
The country’s asset management companies ( AMCs) are gearing up for the opportunity. Also, stock exchanges where these ETFs are traded are taking measures, like market making, to boost the appeal of these passive investment products.
ETFs are considered low- cost investment options that track returns of an underlying security or asset. They generally track an index, a basket of securities, commodities or debt securities. As the name suggests, ETFs are traded on an exchange like asingle stock.
Experts say as our equity markets mature, more investors will opt for passive as against active investing, the preferred route at present. Currently, equity ETFs, with assets of Rs.8,920 crore, account for a little less than three per cent of all equity assets under management ( AUM), Rs.3.5 lakh crore at the end of September.
However, the equity ETF market is set for exponential growth if the new launches and optimism shown by the country’s fund houses is anything to go by.
Already this year, asset management companies ( AMCs) have launched eight new ETFs, taking the total to 36. More fund houses, including ICICI Prudential and Edelweiss, have planned further launches.
Also, the country’s third largest AMC, Reliance Mutual Fund’s decision to acquire ETF- focused Goldman Sachs Asset Management this week is essentially to tap the expected boom in the ETF space.
Goldman Sachs in India operates 10 ETFs, including the biggest, the so- called CPSE ETF which has assets “We see a big opportunity for start looking at ETFs.” On institutional money, the ETF got a big boost in July when Provident Fund Organisation (EPFO) commenced its firstever equity investing through this route. With assets of Rs.6.5 lakh crore and 80 million members, it is one of the world’s largest The fund, however, is currently investing only one per cent of its funds into equities and plans to scale it up to five per cent of incremental flow.
Recently, Indias second largest fund house, ICICI Prudential AMC, gave a proposal to the Securities and Exchange Board of India to launch as many as four ETFs. Two of the proposed schemes have the oil & gas and metals index as underlying products, the first of its kind in the sector.
Chintan Haria, fund manager & head of product development & strategy at ICICI Prudential AMC, said: " As part of our overall ETF strategy, we intend to provide a wider product range for investors to benefit from." "The biggest factor stoking interest in ETFs are the large assets from EPFO," said a senior fund executive. The hope in the sector is for EPFO to raise its equity exposure to as much as 15 per cent.
ETFs are also likely to gain in appeal as the debate to cut costs of transacting gains prominence. The expense ratio for ETFs is 30- 50 basis points; for active management funds ( that come through a distributor or agent), it is around 2.5 per cent.
Business Standard, New Delhi, 23rd Oct. 2015

Comments

Post a Comment

Popular posts from this blog

RBI deputy governor cautions fintech platform lenders on privacy concerns during loan recovery

By
  India's digital lending infrastructure has made the loan sanctioning system online. Yet, loan recovery still needs a “feet on the street” approach, Swaminathan J, deputy governor of the Reserve Bank of India, said at a media event on Tuesday, September 2, according to news agency ANI.According to the ANI report, the deputy governor flagged that fintech operators in the digital lending segment are giving out loans to customers with poor credit profiles and later using aggressive recovery tactics.“While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending small-value loans to customers often with poor credit profiles,” Swaminathan J said.   Fintech platforms' business models The central bank deputy governor highlighted that many fintech platforms' business models involve providing sm
Post a Comment
Read more

Credit card spending growth declines on RBI gaze, stress build-up

By
  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the rep
Post a Comment
Read more

India can't rely on wealthy to drive growth: Ex-RBI Dy Guv Viral Acharya

By
  India can’t rely on wealthy individuals to drive growth and expect the overall economy to improve, Viral Acharya, former deputy governor of the Reserve Bank of India (RBI) said on Monday.Acharya, who is the C V Starr Professor of Economics in the Department of Finance at New York University’s Stern School of Business (NYU-Stern), said after the Covid-19 pandemic, rural consumption and investments have weakened.We can’t be pumping our growth through the rich and expect that the economy as a whole will do better,” he said while speaking at an event organised by Elara Capital here.f there has to be a trickle-down, it should have actually happened by now,” Acharya said, adding that when the rich keep getting wealthier and wealthier, they have a savings problem.   “The bank account keeps getting bigger, hence they look for financial assets to invest in. India is closed, so our money can't go outside India that easily. So, it has to chase the limited financial assets in the country and
Post a Comment
Read more