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Nifty turns global hot property

Ashish Rukhaiyar  |  Mumbai 

Nifty-based already available on eight exchanges; to push exponentially.

The has gained popularity across time zones, with exchange-traded funds (ETFs) based on it being traded on eight stock exchanges across the globe. This even as the futures and options of the National Stock Exchange’s benchmark index are set to be traded on the Chicago Mercantile Exchange (CME).

based on Nifty, owned by NSE’s subsidiary India Index Services, are available on Nasdaq, Swiss Exchange, Borsa Italiana, NYSE Euronext Paris, London Stock Exchange, Singapore Stock Exchange (SGX), Tokyo Stock Exchange and Further, futures based on the are available on According to Bloomberg, the market value of Nifty-based is in excess of $2 billion.

Index licensing, in which owners allow introduction of products based on their indices on other stock exchanges, is a big business globally.

According to Standard & Poor’s (S&P), it “maintains more than 550 licence agreements with major financial institutions around the world by offering global licences that encompass all Standard & Poor’s index offerings by an institution, as well as licences for single transactions”.

Experts say are the best way to play the Indian market. “are one of the most efficient ways to take exposure to India, particularly as the country controls foreign investments so heavily,” said Tom Lydon, president, Global Trends & ETF Trends, a US-based research group dedicated to “The average retail investor will not be able to get this kind of an exposure to India otherwise,” said Lydon.

The view is shared by entities that have been involved in management of globally. “Nifty-based are one of the most convenient and cost-effective products to bet on India. Several institutions can use futures to hedge the they provide,” said Pankaj Vaish, managing director and head of equities, Nomura Financial Advisory & Securities (India). Nomura Asset Management manages the ETF in Japan.

The recent addition to globally available Nifty-based is Next Funds S&P CNX Linked ETF that made its debut on the Tokyo Stock Exchange in November last year. The current market value of the fund, according to Bloomberg, is $40.43 million. iShares S&P CNX India 50 Fund made its debut in November 2009 on The fund, managed by Blackrock Fund Advisors, is trading near its all-time high and has a market value of $39.81 million.

ETFs, which can be traded just like shares and give the benefits of mirroring an index, have gained immense popularity globally. This is corroborated by the fact that the world's most popular ETF, Spider, which tracks the S&P500, has a market capitalisation of nearly $75 billion. It was launched in December 1993.

Lydon, however, says that one should start looking at sector-based “that play to India’s strengths as an economy”.

“We’re hitting the point where there are a lot of broad India and it may be time to begin drilling down into sector ETFs,” he said. India is very much a developing market and so funds that focus on the country's small-cap companies may be of interest to investors, he adds.

First Published: Fri, March 19 2010. 00:49 IST