India Infoline AMC to launch Nifty-linked ETF

India Infoline Asset Management Company (AMC) said on Tuesday it would launch an exchange-traded fund (ETF) based on the National Stock Exchange’s benchmark Nifty index, targeting one of the fastest-growing categories in the Indian mutual fund sector.

The IIFL Nifty ETF will be the first offering from the fund house, backed by the Mumbai-based India Infoline Group (IIFL), after it received regulatory approval to start the business in March. India Infoline AMC will be the 46th player in India’s competitive MF space, which collectively had average assets under management (AUM) of Rs 7,43,719 crore as on June 30, shows data from the Association of Mutual Funds in India (Amfi).

“Our strategy would be to focus on ETFs initially. Over a period of time, we will become a full-fledged MF house,” said Nirmal Jain, chairman of IIFL Group. “The ETF market in India is considered under-penetrated. Globally, most of the money goes to index funds and ETFs.”

ETFs are one of the fastest growing categories in India. As of March 31, the AUM of ETFs had increased more than five times to Rs 6,916 crore from Rs 1,403 crore as of March 31, 2009, according to Amfi data. Still, the share of ETFs in India is less than one per cent of total assets managed by all fund houses. In comparison, ETFs account for around five per cent of funds globally.

IIFL AMC will charge 25p per Rs 100 for one year as fees and expenses for the scheme, which it says is the lowest among all equity schemes in India. The new fund offer (NFO) will open for subscription tomorrow and close on October 12. The minimum application size during the NFO will be Rs 5,000. The fund house will target a minimum of Rs 20 crore during the NFO, Jain said.

To ensure sufficient liquidity in the IIFL Nifty ETF, which is to be traded on the stock exchanges, the fund house will make sure there is adequate market-making in the scheme, Jain said. Market makers provide two-way quotes on a security.

India Infoline AMC has also applied with the Securities and Exchange Board of India to launch IIFL Dividend Opportunities ETF, which aims to provide exposure to high-yielding companies listed on the NSE.