The growing investor interest in passively-managed funds has made exchange traded funds (ETFs) a much larger category than where they were a couple of years back. As on September 30, 2021, ETFs had Rs 3.62 lakh crore worth of assets under management, up from Rs 1.47 lakh crore as on September 30, 2019. It is not just the high net-worth investors (HNIs) and institutional investors that are getting drawn to ETFs, retail investors are also showing interest in ETFs. Between September 2020 and September 2021, AMFI quarterly data shows that retail folios more than doubled to 67 lakhs. Mutual funds have also been launching different types of ETFs to meet this growing investor interest. Both old and new fund houses have been busy filing for ETF approvals with SEBI.
Large cap-oriented ETFs: Most fund houses have an ETF linked to the Nifty 50 or Sensex, which are indices containing the largest blue-chip companies by market cap. Some of the fund houses also offer Nifty Next 50 ETFs. Companies from this index are expected to graduate into becoming blue-chips themselves in future and getting included in the Nifty 50 Index. Apart from these, mutual funds have launched several Nifty-based ETFs that offer a different investment styles. For example, the ICICI Pru Nifty Alpha Low Vol 30 ETF gives investors exposure to a mix of investment ideas expected to be less volatile, with the potential to give outsized returns. This ETF invests in Nifty 100 companies and Nifty Midcap 50 companies. The NV 20 ETF gives exposure to investors to value investment ideas within the Nifty 50 Index. Nippon Life India MF, Kotak MF and ICICI Pru MF offer this ETF. Edelweiss Nifty 100 Quality 30 ETF and SBI ETF Quality are the other style-based ETFs.
Midcap-oriented ETFs: As the name suggests, these are ETFs that track midcap companies. There are a few fund houses offering this. Motilal Oswal Mutual Fund offers the Midcap 100 ETF, which tracks the Nifty Midcap 100 Index. Nippon Life India and ICICI Pru offer ETFs that track the Nifty Midcap 150 Index.
Multicap-oriented ETFs: Currently, there is only one ETF in this category, i.e. ICICI Pru S&P BSE 500 ETF, which tracks S&P BSE 500 Index. But, we could soon see several more ETFs in this category, as the new mutual funds want to focus on offering simpler investment products to investors, where investors can get exposure across large-, mid- and small-caps in one place.
Sector and theme-based ETFs: There are now several sector-based ETFs giving investors exposure to infra, banking, private banks, PSU banks, IT, pharma and healthcare sectors. There are also theme-based ETFs like those investing in government-owned companies (PSUs), global markets, companies linked to domestic consumption and ESG-compliant companies. We can see more passively-managed funds coming up in this category, both from old and new fund houses.
Gold ETFs: After the first Gold ETF that was launched back in 2007, now most fund houses offer these ETFs. Investors get exposure to gold, without the need to buy physical gold. An amount of gold, proportionate to the units held by the investor, is purchased by the fund house and stored in vaults. We could also soon see silver ETFs, as SEBI recently amended its regulations to enable such offerings.
Debt ETFs: This is another growing category of ETFs. We have seen mutual funds launch debt ETFs, invest in bonds of PSU companies, as well as government securities and bonds issued by state governments. Axis MF has recently launched an ETF that invests in bonds of AAA-rated companies, as well as bonds issued by state governments.
Jash Kriplani is a journalist with over ten years of experience. Based in Mumbai. Covering mutual funds, personal finance. His last stint was with Business Standard, where he covered mutual funds and other developments in the financial markets
