MUMBAI: There has been a 26-fold rise in assets under management (AUM) of exchangetraded funds (ETFs) in a little over five years to more than Rs 2 lakh crore now. The main reasons are government support for these schemes, rising popularity among investors, and acceptance by fund houses to launch equity and debtbased ETFs with lower management costs.
Of the total, ETFs on the NSE’s Nifty index have a 49% market share, accounting for a little over Rs 1 lakh crore, data from MF industry body Amfi showed. And gold ETFs managed assets worth an additional Rs 13,500 crore. According to NSE MD & CEO Vikram Limaye, the exchange was working actively with the MF industry “for creating investor awareness and promotion of ETFs through various channels of communication in India”.
Nifty 50 and various other Nifty indices have been well accepted and recognised for launching ETFs in India, said NSE Indices CEO Mukesh Agarwal. His entity constructs and manages various indices based on which ETFs have been launched by fund houses. “NSE Indices believes in product innovation and we will continue to work with various stakeholders in developing new indices, including debt indices, to facilitate new ETFs that will offer a variety of investment products to investors,” Agarwal said.
A large part of the growth in ETFs’ AUM could be attributed to the decision by the EPFO five years ago to invest part of its incremental inflows in equities through the ETF route, fund industry officials said. The number of ETFs has also more than doubled to 82, from 34 as of end-fiscal 2015.
In August 2015, the EPFO had initially agreed to invest 5% of incremental monthly inflows into ETFs based on the Nifty, and then included similar schemes based on the sensex. SBI Mutual Fund was the first to get the EPFO mandate, followed by UTI MF. While this gave a boost to ETFs in India, the mandate by the government to launch several ETFs also boosted its popularity. Fund houses run by Nippon Life, ICICI Prudential and Edelweiss currently have government mandates to run equity and debt ETFs.
According to ICICI Prudential Mutual Fund MD & CEO Nimesh Shah, the two most important drivers for ETF growth in India have been the government and the regulatory thrust in this segment. “The government thrust has been largely driven by EPFO corpus allocations and adoption of ETFs for its disinvestment initiatives,” Shah said.