The Indian ETF market has seen significant growth in recent years, reflecting increased investor awareness and demand for passive investment options. From equity-based ETFs tracking major indices like Nifty and Sensex to sector-specific and even gold ETFs, the market offers a wide range of choices.
This expansion has made it easier for both retail and institutional investors to access diversified market exposure, manage risk, and potentially enhance returns. As the Indian financial markets continue to evolve, ETFs are likely to play an increasingly important role in shaping investment strategies and portfolio construction for investors across the spectrum.
To keep up with this trend, letтАЩs discuss the top 10 Indian ETFs that you cannot miss investing out on.
What is an ETF?
Unlike traditional mutual funds, ETFs trade on stock exchanges throughout the day, providing greater flexibility and liquidity. These are versatile investment vehicles that offer exposure to a diverse range of assets, such as stocks, bonds, or commodities.
ETFs work by pooling investors’ money to purchase a basket of underlying assets. The fund provider creates shares that represent ownership in this basket, which investors can then buy and sell on the open market. This structure allows ETFs to closely mirror the performance of their target index or sector while offering benefits such as intraday trading, transparency, and potential tax efficiency.
Moreover, investing in ETFs provides a simple way to diversify across multiple securities with a single transaction, often at lower costs than actively managed funds. ETFs are highly liquid, allowing investors to buy or sell shares easily throughout the trading day. Also, many ETFs are more tax-efficient than traditional mutual funds due to their unique structure, potentially resulting in fewer capital gains distributions.
Factors to Consider When Choosing ETFs
When selecting ETFs for your investment portfolio, several key factors can significantly impact your returns and overall investment experience. Understanding these elements will help you make more informed decisions aligned with your financial goals. Here are the crucial factors to consider when choosing ETFs:
- Expense ratios: This is the annual fee charged by the ETF to cover operating costs. So, look for ETFs with expense ratios below 0.5%, as these tend to be more cost-effective over time.
- Tracking error: This measures how closely an ETF follows its underlying index. A lower tracking error indicates that the ETF is accurately replicating its index’s performance.
- Liquidity: Higher liquidity means you can buy or sell shares easily without significantly impacting the price. Hence, check the ETF’s average daily trading volume and bid-ask spread (the difference between the highest buy and lowest sell prices).
- Historical performance: While past performance doesn’t guarantee future results, it can provide insights into how the ETF has behaved in different market conditions.
Top 10 ETFs in India
The top ETFs in India that provide various options for investors, from broad market exposure to sector-specific investments, with most showing strong long-term performance are:
1. SBI тАУ ETF Nifty 50
SBI ETF Nifty 50 tracks the Nifty 50 index, offering exposure to India’s top 50 companies. With a market capitalization of Rs. 11,118.27 crores, it provides a broad representation of the Indian equity market. This ETF has shown strong performance, with a 1-year return of 28.52%. Also, its low P/E ratio and high P/B ratio of 24.51 suggest it may be popular among value investors.
2. SBI – ETF Sensex
SBI ETF Sensex mirrors the S&P BSE Sensex, focusing on large-cap stocks that make up at least 80% of its portfolio. With an impressive Assets Under Management (AUM) of Rs. 110,153 crores, it’s a significant player in the Indian ETF market. This ETF has delivered consistent returns, with 25.21% over 1 year and 14.95% since inception.
3. UTI Nifty Exchange Traded Fund
UTI Nifty 50 ETF aims to replicate the Nifty 50 Index, providing returns that closely correspond to the index’s performance. With a substantial AUM of Rs. 52,120.16 crores, it offers investors a way to gain exposure to India’s top 50 companies. The fund has shown solid performance with a 3-year return of 14.37%
4. CPSE Exchange Traded Fund
CPSE ETF offers a unique investment opportunity in Central Public Sector Enterprises. Its portfolio comprises a mix of large-cap (69.99%), mid-cap (25.37%), and small-cap (2.57%) stocks, providing diversified exposure to government-owned companies. This ETF has delivered exceptional returns, with a 1-year return of 113.34% and a 17.73% return since inception.
5. UTI Sensex Exchange Traded Fund
UTI Sensex ETF tracks the S&P BSE Sensex Index, representing the top 30 listed companies in India. It offers investors an easy way to gain exposure to the blue-chip segment of the Indian equity market. The fund has demonstrated strong performance, with returns of 25.59%, 50.93%, and 96.76% over 1, 3, and 5 years respectively.
6. Nippon ETF Nifty BeES
Nippon ETF Nifty BeES tracks the Nifty 50 index, providing exposure to the 50 largest Indian companies. It offers investors a diversified portfolio of blue-chip companies across various sectors of the Indian economy. This ETF has shown solid returns, with 12.1%, 44.25%, and 101.17% over 1, 3, and 5 years respectively.
7. ICICI Prudential Nifty ETF
ICICI Prudential Nifty ETF aims to mirror the performance of the Nifty 50 index. With at least 80% of its assets in large-cap stocks, it offers a stable investment option tracking India’s top companies. The fund has delivered consistent returns, with 28.34% over 1 year and 14.85% since inception.
8. Nippon ETF Liquid BeES
Nippon ETF Liquid BeES is an open-ended liquid debt scheme, offering a cash equivalent investment option. With an AUM of Rs. 11,903 crores, it invests primarily in bonds with maturities up to three months. This ETF has provided stable returns, with 5.78% over 1 year and 5.84% since inception.
9. Nippon ETF Gold BeES
Nippon ETF Gold BeES offers exposure to gold price movements without the need for physical ownership. It’s backed by physical gold, making it an accessible way to invest in this precious metal. The fund has shown strong performance, with returns of 12.38%, 44.61%, and 101.67% over 1, 3, and 5 years respectively.
10. Nippon ETF Sensex
Nippon ETF Sensex tracks the BSE Sensex, focusing on large-cap stocks that constitute at least 80% of its portfolio. With an AUM of Rs. 8,079 crores, it offers exposure to 30 of India’s largest and most liquid stocks. The fund has delivered consistent returns, with 25.32% over 1 year and 12.91% since inception.
Exploring International Opportunities: Top 10 US ETFs for Indian Investors
Investing in US ETFs offers Indian investors a gateway to the world’s largest and most dynamic economy. By diversifying into US markets, investors can tap into global growth opportunities, hedge against currency fluctuations, and gain exposure to sectors and companies not readily available in the Indian market. Here’s a look at 10 top US ETFs that Indian investors might consider:
1. SPDR S&P 500 ETF (SPY)
SPY is the oldest and most recognized ETF, tracking the S&P 500 index. It offers exposure to 500 of the largest US companies, including tech giants like Microsoft, Apple, and Amazon. With an expense ratio of 0.10%, SPY provides a cost-effective way to invest in the US market.
2. iShares Core S&P 500 ETF (IVV)
IVV is a passively managed ETF that also tracks the S&P 500 index. It’s known for its low fees and broad exposure to the US stock market, making it an excellent core holding for diversified portfolios. Over the past 15 years, IVV has delivered annual returns between 12% and 15%, reflecting the strong performance of the US market.
3. Vanguard Total Stock Market ETF (VTI)
VTI offers comprehensive coverage of the US equity market, including both large and small-cap stocks. It tracks the CRSP US Total Market Index, providing exposure to a broader range of companies than S&P 500-based ETFs. With a year-to-date return of 10.12% and a 5-year return of 14.90%, VTI has demonstrated strong performance.
4. Vanguard S&P 500 ETF (VOO)
VOO tracks the S&P 500 index, offering exposure to 500 of the largest US companies. With an ultra-low expense ratio of 0.03%, it’s one of the most cost-effective ways to invest in the US market. The fund has shown impressive performance, with a 1-year return of 25.75% and a 3-year return of 27.17%.
5. Invesco QQQ Trust Series I (QQQ)
QQQ tracks the NASDAQ-100 Index, focusing on the largest non-financial companies listed on the NASDAQ stock exchange. This ETF is heavily weighted towards technology companies, making it an excellent choice for investors bullish on the tech sector. With a 1-year return of 34.02% and a 3-year return of 35.53%, QQQ has outperformed the S&P 500 over these periods.
6. iShares Core U.S. Aggregate Bond ETF (AGG)
AGG provides exposure to the total US investment-grade bond market. It’s an excellent option for investors looking to add fixed income to their portfolio or seeking a more conservative investment approach. While its returns are lower than equity ETFs (1.61% over 1 year), AGG offers stability and income.
7. Vanguard Growth ETF (VUG)
VUG focuses on US large-cap growth stocks, with a heavy emphasis on technology and consumer cyclical sectors. It’s ideal for investors seeking exposure to companies with above-average growth potential. The fund has delivered impressive returns, with a 5-year return of 18.83% and a 1-year return of 33.29%.
8. Vanguard FTSE Developed Markets ETF (VEA)
VEA offers exposure to stocks in developed markets outside the US, including Europe, Japan, and Canada. It’s an excellent way for Indian investors to diversify globally beyond just the US market. While its recent performance (9.42% over 1 year) has lagged behind US-focused ETFs, VEA provides valuable diversification benefits. This is because it includes well-known multinational companies like Nestle and LVMH.
9. Vanguard Value ETF (VTV)
VTV focuses on US value stocks – companies that are considered undervalued relative to their fundamentals. Its holdings include stable, established companies like Berkshire Hathaway and Johnson & Johnson. The fund has delivered solid returns, with a 3-year return of 18.2%.
10. iShares Core MSCI EAFE ETF (IEFA)
IEFA tracks developed markets outside North America, offering exposure to Europe, Australasia, and the Far East. It includes large, mid, and small-cap stocks, providing a comprehensive international investment option. With a 1-year return of 10.14% and an attractive dividend yield of 3.1%, IEFA offers both growth potential and income.
How to Invest in US ETFs Through Appreciate Wealth
Appreciate Wealth is a user-friendly trading app that allows Indian investors to access ETFs and US stocks directly from their smartphones. The app also offers a low entry barrier, enabling investments starting from just тВ╣1.
This platform bridges the gap between Indian investors and the US market, providing real-time access and a range of investment options. HereтАЩs how you can invest in ETFs using the Appreciate Wealth app:
- Create an Appreciate Account: Sign up on the Appreciate app by providing personal details and necessary KYC (Know Your Customer) documents such as PAN card and address proof. Once verified, your account will be ready for transactions.
- Fund Your Account: Link your Indian bank account to transfer money to your Appreciate account. The app handles currency conversion, offering competitive forex rates for INR to USD transactions.
- Choose Your ETF: Browse through the available US ETFs on the platform. Use Appreciate’s research tools and educational resources to make informed decisions based on your investment goals and risk tolerance.
- Place Your Order: Execute your buy order through the app’s interface. You can opt for a market order (buy at current price) or a limit order (set a maximum purchase price). Orders are processed during US market hours.
- Monitor and Manage: Keep track of your investments through the app’s dashboard. Appreciate provides real-time updates and analytics to help you manage your portfolio effectively.
Appreciate offers several advantages for Indian investors venturing into US ETFs, including low transaction fees that make frequent trading affordable. The app also provides AI-powered recommendations and educational resources, helping investors make informed decisions. Moreover, features like fractional investing allow for diversification even with small amounts, while automated SIPs (Systematic Investment Plans) enable consistent, long-term investing.
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Note: After buying shares, itтАЩs important to track their performance and manage your portfolio effectively. Use our Stock Price Average Calculator to calculate the average price of multiple purchases and get a clearer picture of your overall investment
FAQs about Indian ETFs
Which is the best ETF in India?
Determining the best ETF in India depends on individual investment goals, risk appetite, and market outlook. However, popular choices include Nippon India ETF Nifty 50 BeES for broad market exposure and ICICI Prudential Mutual Fund – BHARAT 22 ETF for diversified sector investment.
What are the top 5 ETFs to buy?
The top 5 ETFs to consider buying based on recent performance include:
- Motilal Oswal Nifty Realty ETF with a 1 year return of 46.59%
- Tata Nifty Private Bank ETF with a 1 year return of 14.38%
- Mirae Asset Nifty Financial Services ETF with a 1 year return of 17.8%
These ETFs are favoured for their robust returns, despite their high-risk categorization.
Which ETF gives the highest return?
The Nippon India ETF Nifty 50 BeES has historically provided the highest returns, delivering 102.38% over the past five years and 707.9% over the last fifteen years. Its consistent performance makes it a top choice for long-term investors seeking substantial growth.
Which ETF has the highest volume in India?
Nippon India Silver has the highest trading volume in India, with 13.20 million units traded recently. High trading volume often indicates strong liquidity and investor interest.
Which ETF has the highest growth?
The Nippon India ETF Nifty 50 BeES is noted for its significant growth, with a 10-year return that outperforms many other ETFs in the market. It is a strong contender for investors looking for substantial long-term capital appreciation.
Which ETF has the highest 10 year return?
The ETF with the highest 10-year return in India is the Nippon India ETF Nifty 50 BeES. This ETF has consistently delivered substantial returns, making it a top choice for long-term investors seeking significant capital growth.
Conclusion
The top 10 ETFs in India offer diverse investment opportunities, from broad market exposure through Nifty and Sensex trackers to sector-specific options like CPSE ETF. However, diversifying beyond domestic markets is crucial for a well-rounded portfolio. US ETFs offer access to the world’s largest economy and global leaders in various sectors. By combining Indian and US ETFs, investors can create a balanced portfolio that taps into both local and international growth opportunities.
Disclaimer: Investments in securities markets are subject to market risks. Read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory.
