ETFs find traction, investors from 588 cities attracted to it

Exchange traded funds (ETFs) seem to be fast gaining ground in India, with investors from about 588 cities being attracted now towards such an investment product.

Investments in ETFs were seen from 464 cities across the country during 2007-08 but has now expanded to 588 cities, including those from the North-Eastern states till March 2017, latest data provided by stock exchange NSE shows.

The newly added cities include Aizawl in Mizoram, which recorded the highest gross traded value for ETFs at Rs 26 crore in 2016-17.

Aizawl was followed by city of Papum Pare in Arunachal Pradesh with trading value of Rs 2.66 crore.

Bundi (Rajasthan), Baran (Rajasthan), Damoh (Madhya Pradesh), Dhar (Madhya Pradesh), Anuppur (Madhya Pradesh), Sitamarhi (Bihar), Karauli (Rajasthan) and Sheikhpura (Bihar) were other newly added top ten cities in terms of gross traded value for ETFs, the National Stock Exchange (NSE) said.

Meanwhile, various other cities including non-metros have shown manifold growth in investments in ETFs.

Raigarh in Maharashtra with a two-year average annual growth rate of 552 per cent topped the list of the fastest growing cities in terms of average daily value of ETFs.

Raigarh is followed by Vishakhapatnam and Ahmedabad with a 2-year average annual growth of 423 per cent and 76 per cent, respectively.

Thane (70 per cent), Mumbai (54 per cent), Delhi (41 per cent), North 24 Parganas (32 per cent), Hyderabad (30 per cent), Kolkata (12 per cent) and Bangalore (3 per cent) are the other top-10 cities on the list.

The reach and growth of ETFs to far corners of India can be attributed to the government issue of Central Public Sector Enterprise Exchange Traded Fund (CPSE ETF) which has generated high returns for the investors.

"The government has been using ETF route for disinvestment and in that context the last two issues of CPSE ETF have been very well received by retail and institutional investors and heavily oversubscribed," Mukesh Agarwal, CEO, India Index Services and Products, a group company of NSE, told PTI.

Besides, he said more investor awareness and education campaigns, as well as promotional activities by mutual funds, have helped deepen investments in ETFs.

ETFs are group of securities that are traded like individual stocks on an exchange and carry lower management costs than mutual funds.

CPSE ETF comprises scrips of 10 public sector units.

The government had raised Rs 6,000 crore in the second tranche of CPSE ETF in January and Rs 3,000 crore from the first tranche in March 2014.