Exchange-traded funds (ETFs) are slowly gaining traction among retail investors and fund houses are lining up to offer such products to attract more such investors. In the last few months, offer documents of six ETFs were filed with market regulator, Securities and Exchange Board of India (Sebi).
Other ETFs, which exclude gold ETFs, witnessed net inflows of R4,714 crore in the last 12 months, according to the data from Association of Mutual Funds in India (Amfi). Fund houses like Reliance Mutual Fund, ICICI Prudential Mutual Fund, Kotak Mahindra Mutual Fund and SBI Mutual Fund are among other who have filed offer documents for ETFs.
Reliance MF has filed three offer documents with variousthemes such as Reliance MSCI India Domestic ETF, R*Shares CNX Midcap ETF and ‘R*Shares NV20ETF. Sundeep Sikka, CEO at Reliance Mutual Fund says, “We have seen positive and constant flows into equity funds in the past few months. However, over the same period, we have also started looking at flows coming regularly into other ETFs.”
ETFs are passive funds, considered as a ‘niche’ segment where only informed investors invest. But the current trends show that Indian investors have started looking at ETFs, which could be positive for the industry. While SBI Mutual Fund has filed an offer document for SBI ETF 10-year Gilt, Kotak Mahindra Mutual Fund has filed for Kotak NV 20ETF.
“We are seeing increasing investor interest in ETFs, though the number is small compared to people investing in active funds. There are investors who are looking at such themes and as asset managers we are providing them avenues of investments,” added Sikka.
Market participants also say money is flowing into the banking ETFs as investors feel the sector can benefit from a revival in the economy. “I think several high net worth individuals (HNIs) are entering banking ETFs. We might continue to see flows into banking ETFs from sophisticated as well as retail investors going forward,” said a fund manager.
Currently, there are around 14 schemes that focus on banking and financial sector, which also includes five banking ETFs that closely correspond to the total return of stocks represented by the CNX Bank Index. ICICI Prudential MF has filed an offer documents for its ICICI Prudential Bank ETF. The industry is hoping that with the slew of new ETFs, retail investors will also enter the ‘passive fund’ space.
