Exchange Traded Funds (ETF's)

Exchange Traded Funds are essentially Index Funds that are listed and traded on exchanges like stocks. An
ETF is a basket of stocks that reflects the composition of an Index, like Nifty 50. The ETFs trading value is
based on the net asset value of the underlying stocks that it represents.
They first came into existence in the USA in 1993. It took several years for them to attract public interest.
But once they did, the volumes took off with a vengeance. Over the last few years more than $120 billion
(as on June 2002) is invested in about 230 ETFs. About 60% of trading volumes on the American Stock
Exchange are from ETFs.

Advantages of ETFs
 They allow long-term investors to diversify their portfolio at one shot at low cost and insulate them
from short-term trading activity due to the unique "in-kind" creation / redemption process.
 They provide liquidity for investors with a shorter-term horizon as they can trade intra-day and can
have quotes near NAV during the course of trading day.
 They provide investors a fund that closely tracks the performance of an index throughout the day
with the ability to buy/sell at any time, whereby trading opportunities that arise during a day may
be better utilized.
 They are low cost.
 ETFs are like any other index fund, wherein, subscription / redemption of units work on the concept
of exchange with underlying securities instead of cash (for large deals).
 ETFs protect long-term investors from inflows and outflows of short-term investors. This is because
the fund does not incur extra transaction cost for buying/selling the index shares due to frequent
subscriptions and redemptions.
The first ETF in India, "Nifty BeEs (Nifty Benchmark Exchange Traded Scheme) based on Nifty 50, was
launched in January 2002 by Benchmark Mutual Fund. It may be bought and sold like any other stock on
NSE. Its symbol on NSE is "NIFTYBEES".
ETFs are cheaper than traditional mutual funds and index funds in terms of fees. However, while investing
in an ETF, an investor pays a commission to the broker. The tracking error of ETFs is generally lower than
traditional index funds due to the "in-kind" creation / redemption facility and the low expense ratio. This
"in-kind" creation / redemption facility ensures that long-term investors do not suffer at the cost of short-
term investor activity.
ETFs Vs. Open Ended Funds Vs. Close Ended Funds
Parameter Open Ended Fund Closed Ended Fund Exchange Traded Fund

Fund Size Flexible Fixed Flexible

NAV Daily Daily Real Time

Liquidity Provider Fund itself Stock Market Stock Market / Fund itself

Significant Premium /
Sale Price At NAV plus load, if any Very close to actual NAV of Scheme
Discount to NAV

Through Exchange where Through Exchange where listed /

Availability Fund itself
listed Fund itself.

Portfolio Disclosure Monthly Monthly Daily/Real-time

Uses Equitising cash - Equitising Cash, Hedging, Arbitrage

Intra-Day Trading Not possible Expensive Possible at low cost

Structure of ETF

Applications
of ETFs

 Efficient
Trading: ETFs
provide
investors a
convenient
way to gain
market
exposure viz.
an index that
trades like a
stock. In
comparison to
a stock, an
investment in
an ETF index
product
provides a
diversified
exposure to
the market.
Depending on the index, investors may obtain exposure to countries/ markets or sectors.
 Equitising Cash: Investors with idle cash in their portfolios may want to invest in a product tied to a
market benchmark like an index as a temporary investment before deciding which stocks to buy or
waiting for the right price.
  Managing Cash Flows: Investment managers who see regular inflows and outflows may use ETFs
because of their liquidity and their ability to represent the market.
 Diversifying Exposure: If an investor is not sure about which particular stock to buy but likes the
overall sector, investing in shares tied to an index or basket of stocks provides diversified exposure
and reduces stock specific risk.
 Filling Gaps: ETFs tied to a sector or industry may be used to gain exposure to new and important
sectors. Such strategies may also be used to reduce an overweight or increase an underweight
sector.
 Shorting or Hedging: Investors who have a negative view on a market segment or specific sector
may want to establish a short position to capitalize on that view. ETFs may be sold short against
long stock holdings as a hedge against a decline in the market or specific sector.

ETF's available on Equity, Debt, Gold and International Indices ETF's are available.
Best Exchange Traded Funds (ETF) 2019
3-Year 5-Year
Fund Asset Class
Return Return
ICICI Prudential Technology Fund Equity: Sectoral-Technology 16.85% 10.04%
Aditya Birla Sun Life Digital India Fund Equity: Sectoral-Technology 16.88% 11.6%
SBI Technology Opportunities Fund Equity: Sectoral-Technology 15.27% 9.67%
Franklin India Technology Fund Equity: Sectoral-Technology 13.64% 8.31%
Tata Digital India Fund Equity: Sectoral-Technology 18.28% 16.28%

Aditya Birla Sun Life Nifty ETF

Structure An Open ended Exchange Traded Fund.
The investment objective of the scheme is to provide returns that closely
Investment
correspond to the total returns of securities as represented by S&P CNX Nifty,
Objective
subject to tracking errors
Securities comprising of underlying benchmark Index: 95-100%
Debt & Money market instruments: 0-5%
Asset Allocation (as The net assets of the scheme will be invested predominantly in stocks constituting
% of net assets) the S&P CNX Nifty. This would be done by investing in all the stocks comprising the
S&P CNX Nifty in approximately the same weightage that they represent in the S&P
CNX Nifty.
Fund Manager Mr. Satyabrata Mohanty
Traded/Listed on National Stock Exchange of India Limited (NSE)
Pricing Per Unit Approx 1/100th of the value of S&P CNX Nifty Index.
Authorised
Parwati Capital Market Pvt. Ltd. & Edelweiss Securities Ltd.
Participants
Creation Size 50,000 units & in multiples thereof.
Benchmark Nifty 50 TRI.
Allotment Date 21-Jul-11
Exchange Symbol BSLNIFTY
ISIN INF209K01IR4
Bloomberg Code BSLNIFT:IN
Compliance with In light of SEBI circular no. CIR/MRD/DP/32/2012 dated December 06, 2012, the
RGESS guidelines Scheme is in compliance with the provisions of RGESS guidelines notified by
Ministry of Finance vide notification no. 51/2012 [F. No. 142/35/2012-TPL] dated
November 23, 2012.