Business Standard

NSE suggests ETF route for Rajiv Gandhi equity plan

Related News

Even as the exact contours of the newly-proposed (RGESS) are being worked out, another suggestion has landed in the finance ministry’s lap.

The country’s largest equity bourse has made a representation to the ministry, suggesting the funds coming from the tax-saving scheme be invested in the stock market via exchange traded funds (ETFs).

According to sources, the National Stock Exchange (NSE) has recommended the for RGESS funds as a diversified and to invest in stocks.

Introduced in this year’s Budget, RGESS will give tax benefit to small investors putting money directly in equities. However, the idea of encouraging unexperienced retail investors to take direct exposure to stocks has faced widespread criticism.

Many entities, including the Securities and Exchange Board of India (Sebi), had suggested the scheme be routed through mutual funds. However, recent reports suggest the finance ministry isn’t keen on letting mutual funds operate the scheme.

Experts say encouraging small investors to invest directly in the market would be very risky. The ETF option is worth considering, they say.

Investing in ETFs is akin to investing in a basket of securities. ETFs are gaining popularity globally as an investment vehicle for taking passive exposure to asset classes, including equities and gold.

However, equity ETFs are yet to gain much currency in India. Even as there are about 19 such ETFs available in the Indian market, they have less than Rs 1,200 crore of total assets under management, according to data from Value Research.

According to experts, if NSE’s proposal is accepted, it will be a big boost for the country’s ETF market, with several new launches likely.

According to estimates, the RGESS scheme has the potential to attract up to Rs 50,000 crore of retail inflows every year into the stock market.

“The current crop of equity ETFs is mostly confined to and Sensex. The government can prescribe an ETF on the top 100 stocks or a public sector undertaking-specific ETF if it’s okay with the idea,” said an ETF fund manager with a domestic fund house, who did not wish to be identified.

The launch of new ETFs could benefit stock exchanges as well since they charge a one-time listing fees for letting them use their platform. According to Sebi, listing of ETFs on stock exchanges is mandatory.

Read more on:   
|
|
|
|
|
|
|

Read More

Today`s pick

The index-range-traded between 5,125 and 5,200 and closed weak.

Quick Links

 

Market News

Sensex down 200 points; Power stocks dim; RIL dips 2%

Market breadth is weak with 1,610 losers and 1,129 gainers on the BSE.

Steel Strips Wheels gains on highest ever sales in July

The company records highest ever sale of 11.03 lac wheel rims during July 2014

DLF Q1: A bag full of surprises

Though reported profits at nearly Rs 128 crore are 29% lower than last year, they are ahead of analyst expectation of Rs 102 crore

Nifty slips below 7,700; RIL, HDFC dip 1%

Markets continue to trade weak, amid weak global cues, with RIL, HDFC Group shares leading the decline

Upbeat auto market spurs demand for imported natural rubber

Imports cheaper than local rubber, but tyre makers reluctant to reduce prices

Back to Top