ETF

Exchange-traded fund (ETF)



Table of Contents

Chapter1: Introduction4

The inexorable rise of ETF in India4

Indian benchmark5

What is Exchange-traded fund (ETF)7

How ETF works7

Types of ETF in India9

Equity ETF9

Liquid ETF10

Gold ETF10

Comparison of ETF with MF11

Statement of problem12

Objectives of this study13

Chapter 5: Performance investigation on ETF14

Superior presentation of Gold ETF14

Performance evaluation of ETF and MF16

Equity ETF go incorrect to pathway Indices17

No liquidity in ETF17

Low dealing volumes of ETF18

Large following mistake in ETFs19

Inadequate diversification of equity ETFs20

Conclusive analysis21

Superior presentation of Gold ETF21

Mixed presentation of equity ETF22

MFs outperformed ETFs22

Chapter 6: Discussion23

Authors' reflection23

Implications for effective market hypothesis (EMH)23

Lower penetration of ETF in India24

Implications for investors25

Investor dilema26

Theoritical Advances in ETF27

Criticism on evaluation models27

References29

Chapter1: Introduction

 

One of the foremost trends actually in asset management industry is the relentless rise of exchange traded fund (ETF). Globally, ETFs have gained gigantic attractiveness over the last ten years as they can be utilised to gain exposure to several asset categories encompassing equity, repaired earnings, products and currencies. According to nationwide supply exchange (NSE, 2010) of India, ETFs now account for over a trillion dollars in assets, up from only about USD 75 billion in the year 2000. NSE, cited about sixty per hundred of dealing volumes on the American Stock Exchange are from ETFs. The most well liked ETFs are, QQQs (Cubes) is founded on the Nasdaq-100 Index and SPDRs (Spiders) is founded on the S&P 500 Index.

 

The inexorable rise of ETF in India

Times of India (August, 2010), a bulletin cited, with a GDP of USD 3,526 billion in buying power parity and averaging development about 8.5 per hundred for the last five years, India is the world's fourth biggest finances and the second-fastest increasing amidst foremost economies. Dion (2010) opines exchange-traded funds (ETFs) in India have the promise to travel high on a powerful economy. Figure-1 depicts development of ETFs in India, as on May 2007, the worth of assets was Rupees 6000 crores with just eight ETFs. ETFs are undoubtedly appearing as a well liked buying into vehicle in India.

Figure-1: Growth of ETFs in India

Source: Benchmark AMC, 2009

Over the past 12 months, round 20 per hundred of all lesser market, foreign institutional investors (FII) equity flows into the Indian market have arrive from ETFs. Despite this accelerated flow, ETFs in India is still exceedingly little in evaluation to China or Brazil, due to delayed launch of ETFs in India, from historic regulatory issues. In detail, the first ETF, Standard and Poor Depositary Receipts (SPDR) comprising a fund that followed supplies creating S&P 500 supply index, was sold in January 1993. Half a ten years after ETFs became a storm in worldwide markets, India commenced the first ETF in 2001. Though it took some years for ETF to appeal public concern in India, but one time they did, the volumes took off with a vengeance. It is only over past couple of years that ETFs have arrived to the fore in India (Akash Prakash, 2010).

 

Indian benchmark

Sharpe (2000) cited, “One set about is to contrast a portfolio with a market index that is assembled ...