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Exchange Traded Funds (ETFs)

Diversify with ease, invest with confidence!

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Benefits of ETFs

 

Diversification

ETFs offer exposure to a diverse range of shares spreading risk and adding to portfolio stability.

Liquidity

Traded on stock exchanges, ETFs provide easy buying and selling, ensuring quick and efficient transactions.

Low costs

With generally lower fees than traditional mutual funds, ETFs offer a cost-effective investment option.

Transparency

ETFs disclose their holdings monthly, providing investors with clear visibility into the underlying shares.

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Indicative NAV

Indicative NAV, or iNAV, is a real-time estimate of the net asset value of an Exchange-Traded Fund (ETF). Unlike the traditional NAV, which is calculated at the end of the trading day, iNAV is continuously calculated and updated throughout the trading day. It gives investors a glimpse of the ETF's value based on the current market prices of its underlying assets. iNAV helps investors make informed decisions by offering a more immediate and dynamic assessment of the ETF's worth, helping in price discovery and facilitating trading activities. Keep in mind that while iNAV offers valuable real-time insights, it may slightly deviate from the ETF's official NAV calculated at the end of the trading day.

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List of Our ETF Funds
Scheme Name
Current iNAV
Previous NAV
% Change
 
 
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Note: iNAV = Indicative Net Asset Value
Values As On: --


Disclaimer: Delay in INAV for Bajaj AMC ETFs (All Schemes) is approximately 15 seconds

 

What are ETFs

ETFs, or Exchange-Traded Funds, are diversified investment avenues that trade on stock exchanges like individual stocks. Similar to mutual funds, ETFs offer diversification by holding a variety of stocks, bonds, or commodities.
However, unlike mutual funds, ETFs can be bought and sold throughout the trading day at the price quoted on exchange, which is based on the current value of their underlying securities.
Moreover, with most mutual funds, a manager actively chooses the portfolio holdings and makes buy or sell decisions based on the investment strategy and objectives. The goal is usually to outperform the broader market. In comparison, ETFs mirror an existing stock market index (such as the Nifty 50) and seek to replicate its performance (subject to a tracking error, which is the difference between the fund’s performance and that of its benchmark).

How do ETFs work?

An ETF comprises a basket of securities. This could include stocks, bonds, commodities etc. The exact composition of the ETF portfolio depends on the index it is tracking. For example, a Nifty 50 ETF will be made of stocks of the country’s top 50 companies on the National Stock Exchange. The portfolio composition will mirror the benchmark index (in this case, the Nifty 50).
This is similar to how index mutual funds work. However, unlike mutual funds, which can only be bought and sold at the day's end, based on the net asset value (NAV), ETFs trade throughout the day on stock exchanges, just like individual stocks. The mutual fund’s NAV depends on the closing prices of its underlying securities (among other factors). An ETF can trade at a premium or discount to the NAV, based on the value of the portfolio’s holding at the time that units are being bought or sold. Therefore, ETFs provide intra-day liquidity and opportunities to implement trading strategies.

How to select ETFs?

Investors should keep the following factors in mind when choosing an ETF:

Benchmark index: The index on which the ETF is based will influence the risk-reward balance of the fund. Conservative investors may not find equity ETF suitable. Or, investors comfortable with equity investments may want to consider whether they want options with relatively lower volatility (such as large cap ETFs) or higher-risk options with higher reward potential (such as mid or small cap ETFs). Investors with existing mutual fund investments in debt or equity may want to diversify through a commodity ETF. The ETF type will need to align with the investor’s risk appetite and financial goal.
Investment objective: Consider what you are seeking from your investments. If growth potential is your goal, some actively managed mutual funds may offer the potential for market-beating returns. However, if you prefer a passive investment strategy that seeks to replicate market movements, you may consider ETFs or index funds. You may also prefer ETFs if you want intra-day liquidity and trading options.
Investment horizon: Consider your investment timeline. Short-term goals might require relatively stable ETFs that invest in fixed-income securities, while long-term goals can accommodate more volatile options.
Market conditions: Consider the current market environment and how the ETF might perform under different economic conditions.
Tracking error: Check the ETF’s tracking error, which measures how closely the ETF follows its benchmark index. The lower the tracking error, the closer an ETFs performance is to its benchmark.

Types of ETFs

There are numerous types of ETFs in India. Depending on the benchmark index, an ETF may invest in stocks or bonds. There are also gold ETFs, which reflect the prices of domestic gold in India. Within stocks, it may invest in large, mid or small cap companies. Some ETFs may track certain sectors while others may track indices whose stocks are chosen based on certain factors (such as value or momentum stocks). Some ETF types are:

Broad-market ETFs: These are passively managed funds that track a specific broad-market stock market index, such as the Nifty 50 or BSE Sensex. They aim to replicate the performance of the index by holding the stocks in same proportion as the index, subject to tracking error.
Gold ETFs: These funds track the market performance of gold. They provide a convenient way to invest in gold without the need to physically hold the metal. The prices of gold ETFs fluctuate with the market prices of the commodity.
Bond ETFs: Bond ETFs invest in a portfolio of bonds and seek to potentially provide regular income along with relative stability. These can include government or corporate bonds.
Sector ETFs: These funds invest in specific sectors of the economy, such as banking, technology, or pharmaceuticals. They replicate the benchmark index of the sector.
Others: Some ETFs are based on indices that follow a certain investment strategy focusing on value, momentum or low-volatility stocks, among other factors. Examples include Nifty 200 Momentum 30 ETF and Nifty50 Value 20, among others.

How to select ETFs?

Investors should keep the following factors in mind when choosing an ETF: Benchmark index: Conservative investors may not find equity ETFs suitable. Within equity too, investors may want relatively lower volatility (such as through large cap ETFs) or higher-risk options with higher return potential (such as mid or small cap ETFs). Investors with existing mutual fund investments in debt or equity may want to diversify through a commodity ETF. Investment objective: Consider what you are seeking from your investments. If growth potential is your goal, some actively managed mutual funds may offer the potential for market-beating returns. However, if you prefer a passive investment strategy that seeks to replicate market movements, you may consider ETFs or index funds. You may also prefer ETFs if you want intra-day liquidity. Investment horizon:Consider your investment timeline. Short-term goals might require relatively stable ETFs that invest in fixed-income securities, while long-term goals can accommodate more volatile options. Market conditions: Consider the current market environment and how the ETF might perform under different economic conditions. Tracking error: Check the ETF’s tracking error, which measures how closely the ETF follows its benchmark index. The lower the tracking error, the closer an ETFs performance is to its benchmark.

Risks of ETFs

While ETFs offer advantages, they also come with certain risks:

Tracking error: The performance of an ETF can deviate from its benchmark index. This is called tracking errors. A low tracking error indicates that ETF is closely matched with its benchmark index.
Market risk: Like any investment, ETFs are subject to market fluctuations. The value of your ETF can decline if the underlying securities perform poorly.
Liquidity risk: While generally liquid, some ETFs might have lower trading volume, making it harder to buy or sell units quickly at a desired price. Moreover, certain market conditions may also temporarily affect liquidity.

Who should invest in ETFs?

ETFs can be suitable for a diverse range of investors. This can include:

1) New investors who seek exposure to various assets through a single investment.
2) Seasoned investors seeking portfolio diversification or the inclusion of specific asset classes.
3) Investors who want to reduce the role of a fund manager’s decision-making on their investment and prefer to align it with broader market movements.
4) Investors seeking intra-day liquidity and trading flexibility.
5) Investors who want lower expense ratios than that charged by active mutual funds,

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Frequently Asked Questions

 
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ETFs and index funds both track market indices, but the main difference is that ETFs trade like stocks on stock exchanges, offering flexibility and intra-day trading. Unlike index funds, you need a demat account to invest in an ETF.

There are several types of ETFs in India. These include broad market ETFs that track major indices like Nifty 50, gold ETFs, which track the prices of domestic gold, bond ETFs, which invest in government or corporate bonds, sector ETFs, which focus on specific sectors such as banking or technology and commodity ETFs, which track commodities like silver and other metals.

ETFs passively track indices and trade like stocks on exchanges, allowing intraday trading and typically having lower fees. In comparison, actively managed mutual funds invest in securities that are selected by fund managers who seek to outperform the market in the long term. This can lead to higher expense ratios. Moreover, mutual funds are not traded on the stock exchange and units can only be bought and sold at the end of a business day.

The Net Asset Value (NAV) of an ETF is calculated at the close of each trading day. It represents the value of the ETF’s holdings, minus any liabilities, divided by the total number of outstanding units. In addition to the daily NAV, ETFs also provide an indicative NAV or iNAV throughout the trading day, based on real-time market movements.

The market price of an ETF is determined by supply and demand throughout the trading day. The net asset value (NAV), representing the total value of the underlying shares, is calculated at the end of each trading day.

Investors can hold ETFs for the long term. There's no predefined maturity date, and ETFs can be part of a buy-and-hold.

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Product Label

 
  • Bajaj Finserv Nifty 50 ETF (An open ended exchange traded fund tracking Nifty 50 Index)
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  • Bajaj Finserv Nifty Bank ETF (An open ended exchange traded fund tracking Nifty Bank Index)
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Disclaimer

 
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This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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