Even as 2011 is expected to see multiple avenues emerging for investors in India to diversify their portfolio beyond the borders, Benchmark Mutual Fund is planning to launch an Exchange Traded Fund (ETF) based on the S&P 500 index.
Indeed, Indian investors may soon have several options to hedge their local investments. For instance, Motilal Oswal AMC is planning to launch an ETF based on Nasdaq 100 index which is currently under regulatory consideration. Additionally, the National Stock Exchange (NSE) is planning to introduce rupee-denominated futures contracts based on Dow Jones Industrial Average, S&P 500 and FTSE 100 indices. The Securities and Exchange Board of India (Sebi) has already issued detailed guidelines for the launch of such products based on overseas indices.
If approved by Sebi, Benchmark?s S&P 500 ETF will be the second product from the fund house based on an overseas index in less than a year with the previous launch being an ETF-based on Hang Seng index, which kicked off in March 2010. S&P 500 index is owned by Standard and Poor?s and is regarded as the best single gauge of the US market covering 75% of the listed companies. ?We are working with Benchmark AMC for the launch of an ETF based on a rupee adjusted S&P 500 index as the benchmark which is currently awaiting approval,? said Reid Steadman, senior director ? ETF Licensing, S&P Indices. Returns would correspond to the returns generated by S&P 500 since the funds would be invested in ETFs based on the S&P 500 index. Investors will be able to invest a minimum of Rs 10,000 for the scheme.
Indian investors have been slow to latch on to diversifying portfolio beyond the domestic market. The response to the ETF -based on the Hang Seng has not been so encouraging ? total trades on the NSE, in most sessions, are less than hundred trades a day with an occasional spurt in volumes. Sanjeev Shah, ED, Benchmark AMC, said, ?The response from investors is in line with expectations as they are still warming up to the idea of diversifying their portfolio outside of India. We are expecting good growth going forward as more investors seek to invest in overseas markets.?
