Indian investors are increasingly drawn to Exchange Traded Funds (ETFs) due to their attractive features such as diversification, liquidity, and cost-efficiency. Looking towards 2024, it is crucial to identify the most promising ETFs for investment to maximise returns and mitigate risks. This article thoroughly examines the top 15 Exchange-traded Funds (ETFs) in India for 2024. The text provides valuable insights into their performance, sectors, and benefits, enabling investors to make informed decisions.
Understand Exchange Traded Funds (ETFs)
ETFs, or Exchange-Traded Funds, are unique investment funds that function like individual stocks traded on a stock exchange. Investors can diversify their portfolios by accessing various assets, such as stocks, bonds, and commodities, all in one transaction, making ETFs a convenient and effective investment option.
ETFs are created to closely follow the movements of a particular index, sector, or asset class, reflecting the performance of the underlying assets. They provide many advantages, including diversification, flexibility, transparency, cost-effectiveness, and tax efficiency, making them an attractive investment option.
Diversification: ETFs offer investors the advantage of diversification, enabling them to access a wide array of assets through a single investment.
Flexibility: ETFs can be traded throughout the day, allowing investors to respond to market changes quickly.
Transparency: ETFs disclose their holdings daily, so investors can see exactly what they own.
Cost-effectiveness: ETFs are often less expensive than actively managed mutual funds.
Tax efficiency: ETFs are generally more tax-efficient than mutual funds.
ETFs can be used to:
Gain exposure to a specific market or sector
Diversify a portfolio
Hedge against market risks
Generate income
Invest in a specific asset class, such as gold or real estate.
Some common types of ETFs include:
Equity ETFs: Track a specific stock market index, such as the Nifty or Sensex.
Fixed Income ETFs: Track a specific bond market index.
Commodity ETFs: Track the price of a specific commodity, such as gold or oil.
Currency ETFs: Track the value of a specific currency relative to the US dollar.
Sector ETFs: Track a specific sector, such as technology or healthcare.
How do you invest in exchange-traded funds (ETFs) in India?
Investing in ETFs provides a valuable chance to diversify your portfolio and gain access to a wide range of assets. Here are the fundamental steps to get started with investing in ETFs:
1. Open a brokerage account: Find a reputable online brokerage firm that offers ETF trading, such as Zerodha, Fidelity, or Vanguard.
2. Fund your account: Deposit money into your brokerage account, which you will use to buy ETF shares.
3. Choose your ETF: Empower yourself by conducting thorough research and selecting the ETF that aligns with your investment goals, considering factors like its underlying assets, expense ratio, and performance.
4. Set your budget: Decide how much you want to invest in the ETF.
5. Place an order: Use your online brokerage platform to place a buy order for the ETF, specifying the number of shares or the amount you want to invest.
6. Monitor and adjust: Take responsibility for your investment by tracking your ETF’s performance and rebalancing your portfolio to maintain your investment goals.
Some Additional Tips to Consider:
- Understand the ETF’s underlying assets and strategy.
- Check the ETF’s expense ratio and trading costs.
- Consider using a limit order to set a specific price for your trade.
- Diversify your portfolio by investing in multiple ETFs across different asset classes.
- Consult with a financial advisor or research before making investment decisions.
Some Popular Platforms to Invest in ETFs in India Include:
- Zerodha
- Fidelity
- Vanguard
- ICICI Direct
- HDFC Securities
- SBI Securities
Types of Exchange Traded Funds (ETFs) in India
- Equity or Market ETFs: These ETFs track a particular index, such as NIFTY 50 or SENSEX, and provide exposure to a basket of stocks.
- Thematic or Sector ETFs: These ETFs track a specific sector or theme, such as oil, pharmaceuticals, or technology, and provide exposure to related stocks.
- Commodity ETFs: These ETFs track the price of commodities like gold, silver, or oil and provide a way to add commodity exposure to a portfolio without directly owning physical commodities.
- International ETFs: These ETFs track international markets, such as the NASDAQ 100 Index or Hong Kong’s Hang Seng Index, offering investors the security of global diversification.
- Inverse ETFs: These are designed to deliver the opposite performance of a particular index, allowing investors to profit from a market decline.
- Leveraged ETFs: These ETFs use debts and derivative instruments to maximise returns, offering investors the potential to take a more prominent position with less capital and increase their returns.
- Bond ETFs (Debt ETFs): These ETFs invest in fixed-income instruments and generate income from interest payments, providing a debt component to a portfolio.
Factors You Should Consider Before Investing in Exchange Traded Funds (ETFs) in India
Underlying Assets: Understand the assets that the ETF tracks, such as stocks, bonds, commodities, or currencies.
Index or Strategy: Determine whether the ETF tracks a specific index or sector or uses an active management strategy.
Expense Ratio: Check the fees charged by the ETF, as they can eat into your returns.
Trading Costs: Consider the brokerage commissions and other trading costs associated with buying and selling ETFs.
Liquidity: Ensure the ETF has sufficient liquidity for easy buying and selling.
Tracking Error: Understand how closely the ETF tracks its underlying assets or index.
Risk Profile: Assess the ETF’s risk level, considering volatility and credit risk factors.
Performance: Evaluate the ETF’s historical performance, but remember past results aren’t a guarantee of future success.
Tax Implications: Consider the tax efficiency of the ETF, as some may be more tax-friendly than others.
Regulatory Compliance: Ensure the ETF is listed on a reputable exchange and complies with regulatory requirements.
Manager Tenure and Experience: Research the manager’s track record and experience if actively managed.
Holdings and Sector Allocation: Understand the ETF’s underlying holdings and sector allocation.
Currency Risk: When investing in international ETFs, consider currency risk and its potential impact on returns.
Counterparty Risk: Assess the counterparty’s creditworthiness if investing in synthetic ETFs.
Disclosure and Transparency: Ensure the ETF provider offers clear and timely disclosure of holdings, performance, and other relevant information.
Advantages of Investing in Exchange Traded Funds (ETFs) in India
1. Diversification: ETFs offer diversification by allowing investors to gain exposure to a broad range of assets with a single investment.
2. Flexibility: ETFs can be traded throughout the day, allowing investors to respond to market changes quickly.
3. Transparency: ETFs disclose their holdings daily, so investors can see exactly what they own.
4. Cost-effective: ETFs are often less expensive than actively managed mutual funds.
5. Tax efficiency: ETFs are generally more tax-efficient than mutual funds.
6. Convenience: ETFs offer a convenient way to invest in various assets, including stocks, bonds, and commodities.
7. Risk management: ETFs can hedge against market risks and protect investments.
8. Choice: India offers a wide range of ETFs tracking different indices, sectors, and asset classes.
9. Regulatory oversight: SEBI regulates ETFs in India, ensuring safety and security.
10. Liquidity: ETFs are listed on stock exchanges, making buying and selling units easy.
11. No minimum investment requirement: Investors can invest in ETFs with a small amount of money.
12. No lock-in period: Investors can withdraw their investment anytime.
13. Professional management: ETFs are managed by experienced professionals.
14. Regular returns: ETFs offer regular dividends, interest, or capital gains returns.
15. Easy to monitor: ETFs are listed on stock exchanges, making it easy for investors to monitor their investments.
10 Best Exchange Traded Funds (ETFs) in India
Nifty 50 ETF – Reliance Nifty 50 ETF
The Nifty 50 Index is a benchmark for Indian equities, consisting of the top 50 stocks listed on the National Stock Exchange (NSE). Investing in these blue-chip companies offers a well-rounded portfolio and the possibility of long-term growth. The Reliance Nifty 50 ETF (NETF) allows investors to participate in the Nifty 50 Index’s performance, ensuring minimal tracking errors.
Key Features:
- Tracks the Nifty 50 Index
- Invests in the top 50 Indian stocks
- Provides diversified exposure to various sectors
- Offers a low-cost investment option
- Listed on the NSE, allowing easy buying and selling
Benefits:
- Convenient way to invest in the Nifty 50 Index
- Diversified portfolio with a single investment
- Potential long-term growth
- Low expense ratio
- Flexible investment option
Performance:
The Reliance Nifty 50 ETF (NETF) has consistently tracked the Nifty 50 Index, providing investors with returns mirroring the benchmark.
Sensex ETF – SBI Sensex ETF (SBSENSEX)
The Sensex also called the BSE 30 Index, is highly regarded as a benchmark for Indian equities. The index comprises the top 30 stocks on the Bombay Stock Exchange (BSE). Investing in these established companies provides the benefit of a diversified portfolio and the opportunity for long-term growth. The SBI Sensex ETF (SBSENSEX) offers a convenient investment opportunity for individuals interested in the Sensex Index. The index’s performance is tracked exceptionally accurately, with minimal tracking errors.
Key Features:
- Tracks the Sensex Index
- Invests in the top 30 Indian stocks
- Provides diversified exposure to various sectors
- Offers a low-cost investment option
- Listed on the NSE, allowing easy buying and selling
Benefits:
- Convenient way to invest in the Sensex Index
- Diversified portfolio with a single investment
- Potential long-term growth
- Low expense ratio
- Flexible investment option
Performance:
The SBI Sensex ETF (SBSENSEX) has consistently tracked the Sensex Index, providing investors with returns mirroring the benchmark.
Nifty Next 50 ETF – ICICI Prudential Nifty Next 50 ETF (ICICINXT50)
The Nifty Next 50 Index comprises the following 50 stocks beyond the Nifty 50 Index, offering a window into India’s emerging corporate giants. The ICICI Prudential Nifty Next 50 ETF (ICICINXT50) provides a convenient way to invest in these promising companies, tracking the Nifty Next 50 Index with minimal tracking error.
Key Features:
- Tracks the Nifty Next 50 Index
- Invests in the following 50 Indian stocks beyond the Nifty 50
- Provides exposure to emerging sectors and companies
- Offers a low-cost investment option
- Listed on the NSE, allowing easy buying and selling
Benefits:
- Convenient way to invest in India’s next-generation stocks
- Potential for long-term growth
- Diversified portfolio with a single investment
- Low expense ratio
- Flexible investment option
Performance:
The ICICI Prudential Nifty Next 50 ETF (ICICINXT50) has consistently tracked the Nifty Next 50 Index, providing investors with returns mirroring the benchmark.
Bank Nifty ETF – ICICI Prudential Bank Nifty ETF (ICICIBANK)
The Indian banking sector has experienced remarkable growth and transformation in recent years, fueled by economic expansion, digitalisation, and regulatory reforms. The ICICI Prudential Bank Nifty ETF (ICICIBANK) provides investors a focused opportunity to invest in this crucial sector. It closely tracks the Bank Nifty Index, ensuring minimal tracking error.
Key Features:
- Tracks the Bank Nifty Index
- Invests in the top banking stocks in India
- Provides exposure to the growing Indian banking sector
- Offers a low-cost investment option
- Listed on the NSE, allowing easy buying and selling
Benefits:
- Convenient way to invest in the Indian banking sector
- Potential for long-term growth
- Diversified portfolio with a single investment
- Low expense ratio
- Flexible investment option
Performance:
The ICICI Prudential Bank Nifty ETF (ICICIBANK) has consistently tracked the Bank Nifty Index, providing investors with returns mirroring the benchmark.
Liquid ETF – SBI Liquid ETF (SBILIQ)
Liquid funds are essential to any investment portfolio, providing a safe and flexible way to manage short-term cash flows. The SBI Liquid ETF (SBILIQ) offers a unique way to invest in liquid assets, tracking the Nifty 91-Day T-Bill Index with minimal tracking error.
Key Features:
- Tracks the Nifty 91-Day T-Bill Index
- Invests in high-quality, short-term debt instruments
- Provides liquidity and stability
- Offers a low-cost investment option
- Listed on the NSE, allowing easy buying and selling
Benefits:
- Convenient way to invest in liquid assets
- Potential for steady returns
- Diversified portfolio with a single investment
- Low expense ratio
- Flexible investment option
Performance:
The SBI Liquid ETF (SBILIQ) has consistently tracked the Nifty 91-Day T-Bill Index, providing investors with returns mirroring the benchmark.
Gold ETF – SBI Gold ETF (SBIGOLD)
Gold has long been a coveted asset for its value and versatility. It offers a hedge against inflation, currency fluctuations, and market volatility. The SBI Gold ETF (SBIGOLD) provides a convenient and cost-effective way to invest in gold, tracking the domestic gold price with minimal tracking errors.
Key Features:
- Tracks the domestic gold price
- Invests in physical gold bars
- Offers a cost-effective way to invest in gold
- Listed on the NSE, allowing easy buying and selling
- No storage or security concerns
Benefits:
- Convenient way to invest in gold
- Potential for long-term growth
- Diversified portfolio with a single investment
- Low expense ratio
- Flexible investment option
Performance:
The SBI Gold ETF (SBIGOLD) has consistently tracked the domestic gold price, providing investors with returns mirroring the benchmark.
Nifty 100 ETF – ICICI Prudential Nifty 100 ETF (ICICI100)
The Nifty 100 Index is a widely followed benchmark that comprises the top 100 stocks listed on the National Stock Exchange (NSE). The ICICI Prudential Nifty 100 ETF (ICICI100) offers a convenient way to invest in this diversified index, tracking its performance with minimal tracking errors.
Key Features:
- Tracks the Nifty 100 Index
- Invests in the top 100 stocks across various sectors
- Provides diversified exposure to the Indian equity market
- Offers a low-cost investment option
- Listed on the NSE, allowing easy buying and selling
Benefits:
- Convenient way to invest in the Nifty 100 Index
- Potential for long-term growth
- ‘Diversified portfolio with a single investment
- Low expense ratio
- Flexible investment option
Performance:
The ICICI Prudential Nifty 100 ETF (ICICI100) has consistently tracked the Nifty 100 Index, providing investors with returns mirroring the benchmark.
Midcap 100 ETF – HDFC Midcap 100 ETF (HDFCMIDCAP)
The Nifty 100 Index is a widely followed benchmark that comprises the top 100 stocks listed on the National Stock Exchange (NSE). The ICICI Prudential Nifty 100 ETF (ICICI100) offers a convenient way to invest in this diversified index, tracking its performance with minimal tracking errors.
Key Features:
- Tracks the Nifty 100 Index
- Invests in the top 100 stocks across various sectors
- Provides diversified exposure to the Indian equity market
- Offers a low-cost investment option
- Listed on the NSE, allowing easy buying and selling
Benefits:
- Convenient way to invest in the Nifty 100 Index
- Potential for long-term growth
- Diversified portfolio with a single investment
- Low expense ratio
- Flexible investment option
Performance:
The ICICI Prudential Nifty 100 ETF (ICICI100) has consistently tracked the Nifty 100 Index, providing investors with returns mirroring the benchmark.
IT ETF – SBI IT ETF (SBITIT)
The Indian IT industry has driven the country’s economic growth, and its potential is growing stronger. The SBI IT ETF (SBITIT) offers a convenient way to invest in this thriving sector, tracking the Nifty IT Index with minimal tracking errors.
Key Features:
- Tracks the Nifty IT Index
- Invests in top IT stocks across various sectors
- Provides exposure to high-growth potential stocks
- Offers a low-cost investment option
- listed on the NSE, allowing easy buying and selling
Benefits:
- Convenient way to invest in the IT sector
- Potential for long-term growth
- Diversified portfolio with a single investment
- Low expense ratio
- Flexible investment option
Performance:
The SBI IT ETF (SBITIT) has consistently tracked the Nifty IT Index, providing investors with returns mirroring the benchmark.
PSU Bank ETF – ICICI Prudential PSU Bank ETF (ICICIPSBANK)
PSU banks play a vital role in India’s banking sector, offering a diverse range of financial services to the general public. The ICICI Prudential PSU Bank ETF (ICICIPSBANK) provides a convenient investment option, closely tracking the Nifty PSU Bank Index with minimal tracking error.
Key Features:
- Tracks the Nifty PSU Bank Index
- Invests in top PSU banks across India
- Provides exposure to the banking sector’s growth potential
- Offers a low-cost investment option
- Listed on the NSE, allowing easy buying and selling
Benefits:
- Convenient way to invest in PSU banks
- Potential for long-term growth
- Diversified portfolio with a single investment
- Low expense ratio
- Flexible investment option
Performance:
The ICICI Prudential PSU Bank ETF (ICICIPSBANK) has consistently tracked the Nifty PSU Bank Index, providing investors with returns mirroring the benchmark.
Conclusion
The choice of suitable ETFs can significantly impact the performance of your investment portfolio. These 15 exchange-traded funds (ETFs) offer diverse options across various sectors, meeting the requirements of any investor’s strategy in India. Investing in these top-performing ETFs can help you build a strong and diversified portfolio that aligns with your financial goals for 2024. However, carefully assessing your risk tolerance and investment horizon is crucial before making investment decisions. This underscores the importance of adopting a prudent and responsible investment approach to avoid potential risks.
FAQs
Q. What are ETFs, and why should I invest in them?
ETFs, or Exchange Traded Funds, are investment funds traded on stock exchanges, similar to stocks. They offer diversification, lower expense ratios, and liquidity, making them an attractive option for investors.
Q. Which are some of the top ETFs to consider in India for 2024?
Some top ETFs include the Nippon India ETF Nifty 50, the SBI ETF Nifty Bank, and the ICICI Prudential Nifty Next 50 ETF.
Q. What factors should I consider before investing in an ETF?
Consider the ETF’s expense ratio, tracking error, underlying index, and historical performance.
