Investing in Exchange-Traded Funds (ETFs) has become increasingly popular among stock market investors in India. With many options available, choosing the ETF can be overwhelming. This article delves into the Best ETFs in India, providing a detailed overview, advantages, comparison with mutual funds, investment strategies, and tax implications to help you make informed investment decisions.
An ETF stands for an exchange-traded fund, a passively managed investment instrument that trades on a stock exchange. It tracks or mirrors market indices or sectors such as equities, commodities, fixed income, and currencies.
When you purchase an ETF, you get exposure to a wide range of securities without buying individual stocks separately. They can be bought or sold during trading hours or take a long-term investment approach.
Exchange Traded Funds are essentially Index Funds that are listed and traded on exchanges like stocks. Until the development of ETFs, this was not possible before. Globally, ETFs have opened a whole new panorama of investment opportunities to Retail as well as Institutional Money Managers. They enable investors to gain broad exposure to entire stock markets in different Countries and specific sectors with relative ease, on a real-time basis and at a lower cost than many other forms of investing.
An ETF is a basket of stocks that reflects the composition of an Index, like S&P CNX Nifty or BSE Sensex. The ETFs trading value is based on the net asset value of the underlying stocks that it represents. Think of it as a Mutual Fund that you can buy and sell in real-time at a price that change throughout the day.
Types of ETFs:-
- Multi-Asset ETFs
- Commodity ETFs
- Inverse ETFs
- Equity ETFs
- Smart Beta ETFs
- Currency ETFs
- Factor ETFs
- Bond ETFs
- Real Estate ETFs
List of all ETF
Here’s a list of the top ETFs to consider in India.
1. CPSE ETF:-
The CPSE ETF emerges at the top spot, boasting a whopping 108.30 per cent return over the past year. It mainly invests in securities as represented by the CPSE Index, which are government companies such as NTPC, Power Grid, Coal India etc.
The investment objective of the Scheme is to provide returns that, before expenses, closely correspond to the total returns of the Securities as represented by the Nifty CPSE Index, by investing in the Securities which are constituents of the Nifty CPSE Index in the same proportion as in the Index. However the performance of the Scheme may differ from that of underlying index due to tracking error. There can be no assurance or guarantee that the investment objective of the Scheme would be achieved.
With the consistent performance of 55.9 per cent and 26.19 per cent returns over three and five years, respectively, it has garnered a lot of investor attention. In this list, CPSE ETF holds the highest daily AUM of Rs. 39,720.33 crore.
2. Nippon India ETF Nifty 50 BeES
Nippon India ETF Nifty 50 BeES is mandated to invest at least 80 per cent of its assets in large-cap stocks at all times. Being passively managed, it replicates the portfolio of its chosen benchmark index.
Nippon India ETF Nifty 50 BeES is one of the best etf to invest because it tracks the Nifty 50 index, which comprises the top 50 companies listed on the National Stock Exchange (NSE). By investing in NIFTYBEES, investors gain exposure to a diversified portfolio of blue-chip companies across various sectors of the Indian economy, making it a popular choice for broad market exposure.
The scheme aims to provide returns close to the total return of stocks as represented by Nifty 50 Index. It is an ETF which is listed on the capital market (rolling settlement) segment of the NSE.
3. ICICI Prudential Nifty Midcap 150 Etf:-
ICICI Prudential Nifty Midcap 150 ETF is mandated to invest at least 65 per cent of its assets in mid-cap stocks at all times. Being passively managed, it replicates the portfolio of its chosen benchmark index.
ICICI Prudential Nifty Midcap 150 ETF (MIDCAPIETF) focuses on mid-cap companies, offering investors exposure to this market segment with growth potential higher than large-cap stocks but lower than small-cap stocks. Mid-cap stocks are known for delivering attractive returns over the long term, making MIDCAPIETF a suitable choice for investors seeking growth opportunities in the mid-cap segment.
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ICICI Prudential Nifty Midcap 150 ETF is an Equity – Mid-Cap fund. The fund was launched in Jan 27, 2020. Its risk level is Very High. The NAV of the fund as on Jul 16, 2024 is ₹21.98. Its expense ratio is 0.15 %. The fund has an AUM of ₹328.06 Cr. The fund is managed by Kayzad Eghlim, Nishit Patel, Ajaykumar Solanki, Priya Sridhar.
4. Nippon India ETF PSU Bank BeES:-
The investment objective of Nippon India ETF Nifty PSU Bank BeES (Formerly Nippon India ETF PSU Bank BeES) is to provide returns that, before expenses, closely correspond to the total returns of the Securities as represented by the Nifty PSU Bank Index. There can be no assurance or guarantee that the investment objective of the Scheme will be achieved.
Nippon India ETF PSU Bank BeES tracks the Nifty PSU Bank Index, offering exposure to stocks of public sector banks in India. Its appeal depends on individual investment goals and risk tolerance, with potential benefits of diversification across the PSU banking sector. However, like any investment, it carries risks, requiring careful consideration and consultation with a financial advisor before investing.
Nippon India ETF Nifty PSU Bank BeES is mandated to invest at least 80 per cent of its assets in the shares of banks and financial services companies. Being passively managed, it replicates the portfolio of its chosen benchmark index.
5. Motilal Oswal NASDAQ 100 ETF:-
This scheme seeks investment return that corresponds to the performance of the NASDAQ 100 Index, subject to tracking error. The current assets under management (AUM) is ₹5,225 crore and the expense ratio is 0.58%.
The Scheme seeks investment return that corresponds (before fees and expenses) generally to the performance of the NASDAQ-100 Index, subject to tracking error.
The scheme seeks investment return that corresponds to the performance of NASDAQ 100 Index, subject to tracking error. However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved.
Motilal Oswal NASDAQ 100 ETF is in the ETF sector, having a market capitalization of Rs. 8543.16 crores. It has reported a sales of Rs. 0 crores and a net profit of Rs. 0 crores for the quarter ended December 2018. The company management includes , (Motilal Oswal NASDAQ 100 ETF) among others.
6. ICICI Prudential Mutual Fund – BHARAT 22 ETF :-
BHARAT 22 ETF is mandated to invest at least 80 per cent of its assets in large-cap stocks at all times. Being passively managed, it replicates the portfolio of its chosen benchmark index.
The investment objective of the Scheme is to invest in constituents of the underlying Index in the same proportion as in the underlying Index, and endeavor to provide returns before expenses, which closely correspond to the total returns of the underlying Index. However, the performance of the Scheme may differ from that of underlying index due to tracking error. There can be no assurance or guarantee that the investment objective of the Scheme would be achieved.
BHARAT 22 ETF is considered one of the best etf to invest due to its diversified portfolio of blue-chip stocks from key sectors of the Indian economy. It offers investors exposure to well-established companies with strong growth potential and the benefits of diversification and liquidity that Exchange-traded funds provide.
Advantages of Investing in Best ETFs in India:
They are traded on stock exchanges throughout the trading day, allowing investors to buy and sell shares at market prices. ETFs can be traded throughout the trading day at market prices, allowing investors to take advantage of intraday price movements.
ETFs offer built-in risk management features, such as stop-loss orders and options contracts, which can help investors mitigate downside risk and protect their investment capital.
ETFs typically have lower expense ratios than actively managed mutual funds, as they passively track an index rather than rely on active management. ETFs disclose their holdings daily, allowing investors to see what securities are included in the fund.
ETFs can be traded like stocks, which means that investors can buy and sell them throughout the day. This gives investors greater flexibility to react to market fluctuations and adjust their portfolios as needed.
ETFs invest in a diversified basket of securities, which can help to spread out risk across different sectors and companies. This means that investors can gain exposure to multiple stocks with a single investment, reducing the risks of putting all their money in a single stock.
Factors to Consider Before Investing in Best ETFS:
ETFs charge an annual fee, typically a small percentage of assets, to cover expenses. Different funds tracking the same index may feature varying TERs. Evaluate the fund size, as larger ETFs often offer advantages such as lower expense ratios and higher liquidity.
Determine if the ETF aligns with your investment objectives and risk tolerance. Begin by choosing the market of interest and deciding between investing in the overall benchmark index or a specific sectoral index.
Review the historical performance of the ETF relative to its benchmark index and peers. While past performance doesn’t guarantee future results. It’s essential for an ETF to closely mirror its benchmark index.
Traditional tracking error measures the deviation in returns between the ETF and the index. Lower tracking error indicates better performance alignment. ETFs cover diverse asset classes such as stocks, bonds, gold, or sectors.
AUM is the product of shares outstanding and market price per share. It fluctuates with underlying security values and unit purchases/redemptions. Higher AUM often correlates with increased liquidity, making it a useful liquidity proxy.
How to Invest in Best ETFs?
Step 1: To begin, connect with a stockbroker to establish an online trading and DEMAT Account, the initial and most critical step. ( Click here to get your free demat )
Step 2:Â Then, utilise your Login ID and Password to access your account via the broker’s online trading portal website.
Step 3: In the subsequent step, search the Gold ETF you wish to invest in. You can make a lump sum investment or invest regularly through systematic SIPs. Additionally, you can explore Mutual Funds that include inherent gold ETFs.
Step 4:Â Order a buy order for a specific quantity of Gold ETF units.
Step 5: Upon completion, expect to receive a confirmation message via your designated Phone number or Email Address.
Step 6:Â The web system will automatically debit a small fee from your linked Savings Account.