Several mutual funds houses are working overtime to launch exchange-traded funds, popularly known as ETFs, given their growing popularity among investors as well as the convenience and cost advantage they provide.
SBI Mutual Fund is working on equity-based ETFs while Motilal Oswal Mutual Fund, which launched two such products recently, is working on more equity-based ETFs. Axis Mutual Fund and Benchmark Mutual Fund are among the fund houses that have recently launched ETFs either based on equity or commodity.
There are already 25 ETFs listed on the Bombay Stock Exchange and National Stock Exchange offering investment opportunities in a basket of domestic or global equities and gold.
RS Srinivas Jain, senior vice president and chief marketing officer, SBI Funds Management, said, "We have a gold ETF. Now we are working on four ETFs and hope to launch them in future with regulator's approval."
"We as a organisation will focus on ETFs as it is more convenient and cheaper, and also one of the best ways to invest in equity markets," said Nimesh Mehta, vice president and head - products, sales and distribution, Motilal Oswal Asset Management Company.
As compared to the traditional mutual fund products, ETF's fund management cost is lower. Investors pay only 0.75 per cent as compared to 2 per cent to 2.5 per cent in other mutual fund products.
Motilal Oswal has two equity-based ETF products in the market. MOST 50, which was launched in July last year, offers investment option in S&P CNX Nifty stocks. Motilal Oswal launched another equity-based ETF – MOST 100 this month.
"We are working on more such products and we filed draft offer document for another product – Nasdaq 100 with Securities and Exchange Board of India a month ago," Mehta said.
Chokkalingam G, executive director and CIO, FCH Centrum Wealth Managers, expects more such products to hit the market by end of the year.
"Global indices based ETF offerings will remove the constraints that domestic investors right now may be facing with domestic equities not looking the best bet and developed market equities rallying since January 2011," Chokkalingam said.
ETFs debuted on the Indian bourses in early 2007 with the launch of gold-based ETFs. Since then, its popularity is also on the rise.
With the debut of Axis Mutual Fund's gold ETF, there are 9 gold-based ETFs to choose from for those who wish to take a call on the yellow metal.
Tarun Bhatia, director - capital markets, Crisil, said in a recent report that gold ETFs would see higher inflows in the coming months, and more mutual funds are likely to add gold ETFs to their bouquet of offerings.
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