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Mr. Vikram Limaye, MD & CEO, NSE, Mukesh Agarwal, CEO- NSE Indices Limited, Steven Hawkins, President & CEO- Horizons ETFs Management (Canada) Inc, Manooj Mistry, Head of ETFs and Index Investing – DWS, UK and Mr. Ravi Varanasi, Chief Business Development Officer, NSE.

by Prashant Kapadia/NHN

NSE India ETF Conference 2019 was organised, during which discussions on Global & Indian ETF Industry were debated.

Introduction: Exchange Traded Funds (ETFs) are group of securities which are traded like individual stocks on an exchange. ETFs can track indices of various asset classes such as equity, fixed income, commodities etc. Key features of ETFs are transparency, low cost, easy diversification etc.

Phenomenal growth of ETFs in Global Markets: ETFs are attracting significant inflows globally. Globally the growth in ETF segment both in terms of Asset under management (AUM) and range of products has been phenomenal. Globally the total asset under management across ~7797 ETFs/ETPs has crossed USD 5.78 trillion as on Sep, 2019 (Source www.etfgi.com). ETF AUM is dominated by US (70% market share), followed by Europe (16%) & Asia Pacific (11%).

Latest Statistics

Globally the total asset under management across ~7797 ETFs/ETPs has crossed USD 5.78 trillion as on Sep, 2019 (Source www.etfgi.com). ETF AUM is dominated by US (70% market share), followed by Europe (16%) & Asia Pacific (11%). Equity ETFs account for 76%, followed by Fixed Income at 20% and Commodity & Others at 4%

From the first ETF launched in India in December 2001 that was benchmarked to Nifty50, today there are 71 ETFs benchmarked to various equity and debt indices with total asset under management of ~ Rs 1.47 Trillion

Increasing awareness about ETFs, Large cap active funds struggling to outperform large cap indices based ETFs and Low fund management fees of ETFs are few other key factors which has helped the growth of ETF in India

NSE runs an elaborate investor education and awareness program and has conducted 4181 programs across 619 districts in FY 18-19

Equity ETFs dominate the ETF AUM with 95% market share followed by Gold ETFs (4%)

Impressive growth in Indian ETF industry:

Domestic ETF AUM linked to Equity & Debt has grown a stellar rate of 42% per annum from March 2008 – till date

Over same period, number of ETFs linked to equity and debt indices have increased 9 fold from 8 in March 2008 to 71 in Sept 2019

Total ETF AUM has increased by 62 % during last one year (Sept 2018 – Sept 2019) – Detailed data on Equity & Debt ETFS – Nos. of Schemes and Asset under Management (AUM) in the media note

AUM of passive funds stood at Rs. 1.6 trillion as of Sept 2019

Passive investments share in overall mutual funds AUM has increased from 3.8% in March 2018 to 6.5% in Sept 2019

Share of Equity ETFs AUM to total equity category including ELSSs, close ended and interval schemes and Equity ETFs stands at 17% as on Sept 30 2019

ETFs in India: From the first ETF launched in India in December 2001 that was benchmarked to Nifty50, today there are 71 ETFs benchmarked to various equity and debt indices with total asset under management of ~ Rs 1.47 Trillion.

Equity & Debt ETFS – Nos. of Schemes and Asset under Management (AUM):

ETF/FY

Mar 13

 Mar 14

Mar 15

Mar 16

Mar 17

Mar 18

Mar 19

 Sep  19

AUM (Rs Cr.)

1476

4528

8060

16063

44436

72888

134626

1,47,187

# of ETFs

23

26

34

45

51

56

66

71

Source –AMFI

Domestic ETF Landscape

 

Trading volumes of ETFs on NSE (Rs. Cr):

FY

FY-13

FY-14

FY-15

FY-16

FY-17

FY-18

FY-19

FY 20*

Debt ETFs

                   4,454

      5,234

   7,735

        13,785

    18,494

    24,571

    24,159

    13,701

Equity ETFs

                   1,255

        930

   3,428

          3,590

     5,745

     4,661

    17,834

    11,862

Source: NSE, * As on Sep 2019

Average Daily Trading Volume (ADV) of ETFs at NSE:

ADV in Rs Cr

FY-13

FY-14

FY-15

FY-16

FY-17

FY-18

FY-19

FY 20*

Debt ETFs

 18

 21

 32

 56

 75

 100

 97

 112

Equity ETFs

 5

 4

 14

 15

 23

 19

 72

 98

Source: NSE, * As on Sep 2019

Key Growth Drivers: The major growth in ETF segment started in 2014 when the Government decided to take ETF route for disinvestment through CPSE ETF and after witnessing the success of the first CPSE ETF, DIPAM subsequently came up with a couple of more tranches of CPSE ETF in 2016-17 and Bharat 22 ETFs in 2017-18 , 2018-19 and 2019-20. The total capital mobilised via CPSE ETF and Bharat 22 ETF is ~ Rs 90,000 Cr.

Also, in August 2015, in a momentous move, Employees’ Provident Fund Organisation (EPFO) started its investment in the stock markets for the first time through Nifty50 and SENSEX based ETFs.

Increasing awareness about ETFs, Large cap active funds struggling to outperform large cap indices based ETFs and Low fund management fees of ETFs are few other key factors which has helped the growth of ETF in India.

Roles of NSE in promoting ETFs: NSE has been aggressively promoting the ETF product category across various investor classes such as Retail, Institutional investors, long term pension funds etc. though TVC, Print media, social media, Seminars and conferences.

NSE is continuously engaging with investors to ensure a larger participation from the retail segment in ETFs. NSE runs an elaborate investor education and awareness program and has conducted 4181 programs across 619 districts in FY 18-19. Many such programs were conducted in association with the market regulator SEBI and benefits of ETFs were also discussed along with other topics related to investors’ awareness etc. To facilitate the growth of ETF segment and to give options to investor to choose the best suitable ETFs, NSE indices Ltd, a NSE group Company, continuously launches new and innovative indices across multiple strategy and asset class.

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