The Exchange-traded funds (ETFs) began their journey in India way back in 2002 when the first ETF by Nippon India Mutual fund (erstwhile Benchmark Asset Management Company Ltd) was launched in India on the Nifty 50 Index. The ETF was listed on NSE on January 8, 2002, and day one witnessed trading of Rs. 1.30 crores on the NSE.
The journey to the listing of the 150th ETF on the NSE took more than 20 years. The last one-year period has seen a lot of activity in the ETF space, with 41 ETFs getting listed on NSE. The assets under management of ETFs in India are now at Rs. 5.02 lakh crores (end of October 2022), witnessing around a 7.7 times increase in five years as compared to Rs 65,124 crores (end of October 2017).
ETF trading in the secondary market has witnessed exponential growth. The daily average turnover has increased by 10 times in 10 years from Rs. 46 crores in FY14 to Rs. 471 crores in the current financial year. Recently SEBI has asked AMCs to appoint at least two Market Makers (MMs), who are members of the Stock Exchanges, for ETFs to provide continuous liquidity on the stock exchange platform. More than 15 market makers are now engaged by AMCs for market-making in various ETFs.
ETFs received a significant boost with the participation from EPFO in the equity market through investments in ETFs and the Government of India’s decision to divest stakes in public sector companies through ETFs.
In recent times, ETFs have been launched by AMCs on a variety of themes such as factor indices which includes low volatility, Quality, and Momentum indices within an equity asset class, Silver ETFs launched under commodity ETFs and Fixed income ETFs which include themes like a combination of State Development Loans & Government securities and corporate bonds.
On the occasion, Shri Ashishkumar Chauhan, MD & CEO, NSE said: “I thank the Government of India and the market regulator Securities Exchange Board of India (SEBI) for enabling market friendly policies which helped to stimulate the growth of ETF industry, Asset Management Companies (AMCs) who have launched ETFs on different themes, Employees’ Provident Fund Organization (EPFO) for using ETFs as their preferred investment instrument for investing in equities, investors, trading members, index providers who provided benchmark indices for the ETFs and all other stakeholders. Achievement of this milestone has been made possible by the support of the entire ecosystem.
ETFs have served the investing community as a simple instrument to start their investment journey in the capital market through Stock Exchanges. With the availability of ETFs on multiple themes within each asset class or in a combination of asset classes, it has provided an array of choices catering to investors’ diverse needs and risk appetite.”