Growth of Exchange-Traded Funds in India: Review of top-performing ETFs

The journey of ETFs in India began with the launch of the first ETF by Nippon India Mutual Fund (formerly Benchmark Asset Management Company Ltd) on the Nifty 50 Index on January 8, 2002. This pioneering ETF witnessed a trading volume of ₹1.30 crore on its debut day on the NSE. The growth trajectory of ETFs in India has been remarkable, with the listing of the 100th ETF on the NSE taking over 19 years.

In the past year alone, 21 new ETFs have been introduced to the market. By the end of March 2024, the assets under management (AUM) for ETFs in India soared to ₹6.64 lakh crore, a substantial rise from ₹23,000 crore at the end of April 2016.

ETFs are just what their name implies: baskets of securities (Indices) that are traded, like individual stocks, on an exchange. Unlike regular open-end mutual funds, ETFs can be bought and sold throughout the trading day like any stock. ETFs have lower costs of transactions and annual changes compared to index funds. ETFs are considered a safer product for risk-averse and first-time investors who want market-linked returns.

Following are the top five ETFs by their Asset Under Management

SBI Nifty 50 ETF

The SBI Nifty 50 ETF, managed by SBI Mutual Fund, is an open-ended equity fund that launched on July 5, 2015. It tracks the NIFTY 50 TRI index and charges a low Total Expense Ratio (TER) of 0.043% as of May 31, 2024. The fund has total assets worth ₹1,80,683.09 crore as of May 31, 2024. It requires a minimum investment of ₹5,000 and has no exit load. As of June 14, 2024, its Net Asset Value (NAV) is ₹246.54. The fund has achieved a Compound Annual Growth Rate (CAGR) of 13.25% since inception, slightly lower than the benchmark's 14.21% CAGR over the same period.

SBI S&P BSE SENSEX ETF

The SBI S&P BSE SENSEX ETF, managed by SBI Mutual Fund, is an open-ended equity fund that tracks the S&P BSE SENSEX TRI benchmark. Launched on 08-03-2013, it requires a minimum investment of ₹5,000 with no top-up minimum. As of 31-05-2024, it holds assets totalling ₹ 1,09,812.59 crore and charges a low TER of 0.043%. The fund has a turnover of 13% and no exit load. As of June 14, 2024, its NAV stands at ₹837.99. Since inception, the fund has shown a CAGR of 14.79%, outperforming its benchmark's 11.35% return.

UTI Nifty 50 ETF

The UTI Nifty 50 ETF, managed by UTI Mutual Fund, is an open-ended equity fund launched on August 26, 2015. It tracks the NIFTY 50 TRI benchmark and has a low expense ratio of 0.05% as of May 31, 2024. The fund allows an initial investment of ₹5,000. As of May 31, 2024, it has assets totalling ₹52,120.16 crore and a turnover rate of 17%, with no exit load. As of June 14, 2024, its NAV stands at ₹253.79. Since its inception, it has achieved a Compound Annual Growth Rate (CAGR) of 14.5%, outperforming its benchmark's 14.21% return.

CPSE ETF

The CPSE ETF, managed by Nippon India Mutual Fund, is an equity-based Exchange Traded Fund (ETF) launched on 5th March 2014. It tracks the NIFTY CPSE Total Return Index and has a low expense ratio (TER) of 0.05% as of 31st May 2024. This open-ended scheme requires a minimum investment of ₹5,000 and supports top-ups as low as ₹1. As of May 31, 2024, it holds assets worth ₹41,259.61 crore. There is no exit load, and it has a turnover rate of 18%. As of 14th June 2024, its Net Asset Value (NAV) stood at ₹94.10, with a 19.07% Compound Annual Growth Rate (CAGR) since inception, outperforming its benchmark's CAGR of 16.83%.

UTI BSE Sensex ETF

The UTI BSE Sensex ETF, managed by UTI Mutual Fund, is an open-ended equity fund that launched on August 26, 2015. This ETF tracks the S&P BSE SENSEX TRI index. It has a low expense ratio of 0.05% as of May 31, 2024, and requires a minimum investment of ₹5,000. As of May 31, 2024, the fund holds assets worth ₹40,012.19 crore and has a turnover rate of 12%. There are no exit loads associated with this ETF. The Net Asset Value (NAV) as of June 14, 2024, was ₹832.78. Since its inception, the fund has achieved a compound annual growth rate (CAGR) of 14.43%, outperforming its benchmark's CAGR of 11.35%.

ETFs have seen remarkable growth in India, with AUM skyrocketing from ₹23,000 crore in 2016 to ₹6.64 lakh crore by March 2024. The top funds like SBI Nifty 50 ETF and CPSE ETF have demonstrated robust returns and low costs, solidifying ETFs as a preferred investment choice in the Indian market.