Investors lap up Nifty ETFs amid panic selling on Street

Nifty Bees, which mimics the broad-based Nifty 50 index, saw the highest volume of ‘350 crore in its 20-year history.

In a volatile trading session on Thursday with the Nifty 50 losing 815 points amid geopolitical concerns, family offices, retail investors and HNIs are believed to have bought into the Nifty 50 ETF.

The ETF managed by Nippon India Asset Management saw 1.48 lakh trades, with 77% of the volume marked for delivery.

In December 2021, the highest volume clocked by the Nifty 50 ETF was ‘205 crore. In the same session, the total Nifty 50 ETF volume was ‘541 crore, with the balance coming from ETFs like SBI, ICICI, and Kotak, among others.

The ETF managed by Nippon India Asset Management has assets of ‘5,846 crore.

“It is simple and easy to buy a broad-based index that gives you exposure to the top 50 companies rather than searching for individual stocks and trying to understand which will bounce back, after the fall,” says Hemen Bhatia, head – ETF at Nippon India Life Asset Management.

Many analysts believe that on days when there is a big dip, retail investors who do not have the ability to do research or spot individual stocks flock to ETFs like Nifty 50, Bank Nifty and Nifty Next 50, which represent the broader market. They find favour as they can be bought in real time, have a low expense ratio, can be bought in real time and there is no fund manager bias.

“We are seeing a paradigm shift with many millennial investors buying the Nifty 50 ETF as part of their asset allocation to meet their long term goals,” says Suvajit Ray, head-product, IIFL Securities. Some investors also take small bets in such ETFs on volatile days to capture a 5-10% profit in a short span of time.

While individual stocks continue to top the charts in daily volumes in India, globally ETFs are the highest traded securities. SPDR S&P 500 that mimics the S&P 500 is the most actively traded security, clocking volumes of $25-30 billion daily.

Financial planners recommend many first-time investors to start their equity allocation with a plain vanilla product like the Nifty 50 ETF. This is a low-cost product with an expense ratio of just 5 basis points, giving access to top 50 Indian companies that account for 60% of the total market capitalisation.