Best Performing ETFs to Invest in India

Best ETFs in India

Exchange-Traded Funds (ETFs) are gaining popularity among investors due to their ease of use, low costs, and diversification benefits. The ETF market in India is still relatively new, but it is rapidly growing as more investors recognise the advantages of investing in ETFs. However, with so many ETF options in the market, choosing the best ones may be intimidating. This blog will provide a comprehensive guide on the best ETFs in India, covering a range of investment themes and strategies.

What are ETFs?

ETFs are investment funds that trade on stock exchanges like individual stocks. They are designed to track the performance of a particular index, sector, or commodity. ETFs offer several advantages over traditional mutual funds, including lower expenses, tax efficiency, and ease of trading. In India, ETFs are regulated by the Securities and Exchange Board of India (SEBI). They are available on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

How to Choose the Best ETFs in India?

Choosing the best ETFs in India may be challenging, especially for beginners. It is important to consider several factors when selecting an ETF, including the underlying index, expense ratio, liquidity, and historical performance. Investors should also consider their investment goals, risk tolerance, and time horizon before investing in any ETF.

In the following sections, we discuss the best ETFs, grouped by investment theme and strategies.

Best ETFs in India for Broad Market Exposure

• Nifty 50 ETF: The Nifty 50 is a benchmark index representing the top 50 companies listed on the NSE. The Nifty 50 ETF is designed to track the performance of this index, offering investors broad market exposure to some of the largest and most liquid companies in India. The expense ratio for this ETF is typically lower than actively managed mutual funds.
• BSE Sensex ETF: The BSE Sensex is another popular benchmark index representing the top 30 companies listed on the BSE. The BSE Sensex ETF is designed to track the performance of this index, offering investors broad market exposure to some of the largest and most liquid companies in India. The expense ratio for this ETF is typically lower than actively managed mutual funds.

Best ETFs in India for Sectoral Exposure

• Nifty Bank ETF: The Nifty Bank is a benchmark index that represents the performance of the banking sector in India. The Nifty Bank ETF is one of the best ETFs to invest in India that tracks the performance of this index, offering investors exposure to some of the most liquid and giant banks in India. The expense ratio for this ETF is typically lower than actively managed mutual funds.
• Nifty Pharma ETF: The Nifty Pharma is a benchmark index that represents the performance of the pharmaceutical sector in India. The Nifty Pharma ETF is designed to track the performance of this index, offering investors exposure to one of the biggest and most liquid pharmaceutical companies in India. The expense ratio for this ETF is lower than actively managed mutual funds.

Best ETFs in India for International Exposure

• Nifty 50 ETF (USA): The Nifty 50 ETF (USA) is a unique ETF that allows investors exposure to the best Nifty 50 index while investing in US dollars. The ETF is listed on the New York Stock Exchange (NYSE) and is designed for US investors looking to invest in Indian equities. The expense ratio for this ETF is typically higher than other Nifty 50 ETFs due to currency conversion costs.
• S&P 500 ETF: The S&P 500 is a benchmark index representing the performance of the largest 500 companies listed on US stock exchanges. The S&P 500 ETF is designed to track the performance of this index, offering investors exposure to some of the world's largest and most diversified companies. This ETF provides an opportunity for Indian investors to gain international exposure to the US market, considered one of the world's most developed and liquid markets. The expense ratio for this ETF is higher than other domestic ETFs due to the additional costs associated with investing in international markets.

Best ETFs in India for Commodity Exposure

• Gold ETFs: Gold ETFs are best performing ETFs in India, designed to track the performance of gold prices in India. These ETFs invest in physical gold and offer investors a cost-effective and efficient way to invest in gold without needing physical storage. Gold ETFs are a popular investment option for diversifying their portfolio and hedging against inflation. Some popular gold ETFs in India include the HDFC Gold ETF, SBI Gold ETF, and ICICI Prudential Gold ETF.
• Crude Oil ETFs: Crude oil ETFs are designed to track the performance of crude oil prices in India. These ETFs invest in crude oil futures and expose investors to the volatile crude oil market. Crude oil ETFs are a popular investment option for those looking to capitalise on the fluctuating oil prices and geopolitical tensions. However, these ETFs come with higher risks and may not be suitable for all investors.

Best ETFs in India for Fixed Income Exposure

• Liquid ETFs: Liquid ETFs are best-performing ETFs in India, designed to track the performance of short-term debt securities such as commercial papers, Treasury bills, and certificates of deposit. These ETFs expose investors to low-risk, low-yield fixed-income securities, making them a good investment option for those seeking stability and liquidity. Some popular liquid ETFs in India include the Reliance ETF Liquid BeES and the SBI ETF Liquid Fund.
• Long-term Bond ETFs: Long-term bond ETFs are designed to track the performance of long-term debt securities such as government and corporate bonds. These ETFs offer investors exposure to higher-yield, higher-risk fixed-income securities, making them an attractive investment option for those seeking higher returns. Some popular long-term bond ETFs in India include the Bharat Bond ETF and the Nippon India ETF Long Term Gilt.

Conclusion

ETFs have become a popular investment option among investors in India due to their low costs, diversification benefits, and ease of use. With a wide range of best ETFs to invest in India available in the market, investors should consider their goals, risk tolerance, and time horizon before investing in any ETF. The best ETFs in India vary depending on the investment theme and strategy, and investors should research and rely on professional advice before making any investment decisions. However, the ETFs listed in this blog provide a good starting point for investors seeking exposure to the Indian market, international markets, and different asset classes. Happy investing!

Disclaimer

The investment options and stocks mentioned here are not recommendations. Please go through your own due diligence and conduct thorough research before investing. Investment in the securities market is subject to market risks. Please read the Risk Disclosure documents carefully before investing. Past performance of instruments/securities does not indicate their future performance. Due to the price fluctuation risk and the market risk, there is no guarantee that your personal investment objectives will be achieved.