ETF turnover tops Rs 1 trillion for second year on the trot, shows data

Set to surpass previous year value of Rs 1.2 trillion

The value of exchange-traded funds (ETFs) changing hands on the National Stock Exchange (NSE) surpassed Rs 1 trillion in the first nine months of financial year 2023-24 (FY24), and for the second year in a row.

The traded value has touched Rs 1.19 trillion so far in FY24, which is already twice the pre-pandemic volumes, as per the Nifty Passive Insights report. The data for December has been released with a lag.

An analysis of additional data from Capitaline shows around Rs 0.37 trillion in trades since December. This would take the total for FY24 to Rs 1.6 trillion.

ETFs typically consist of securities which typically move in line with the movement of a chosen index. They allow for investors to take exposure to a given basket of underlying assets through units bought and sold on the stock exchange.

The number of ETFs have also doubled from 87 in FY20 to 190 in FY24 (till December). The number of equity ETFs has increased from 68 to 141 and debt from 8 to 24 in the same period. Gold ETFs have risen from 11 in FY20 to 15 in FY24. 

Meanwhile, total assets under management of ETFs has touched Rs 6.5 trillion so far. This is over four times the pre-pandemic figures in FY20. 

A break-up of the assets shows Rs 5.1 trillion, over 90 per cent, came from corporates, 6 per cent from high net-worth individuals, and 2 per cent from retail. Retail investors however accounted for 98 per cent of the total ETF folios. A folio is an investment account. Retail investors are larger in number, translating into more investor accounts, though the amounts invested can be smaller than corporate entities.  

In May 2022, the Securities and Exchange Board of India issued a circular on ‘Development of Passive Funds’, through which the regulator had taken a series of steps to boost ETF trading. One of the key steps was to make it mandatory for investors to take the exchange route if the transaction value is less than Rs 25 crore. Asset managers were also asked to appoint at least two market makers to ensure continuous liquidity, in addition to framing incentive plans for such entities.