Nifty BeES, a combination of a share and a mutual fund unit, trades on the capital market segment of NSE
Nifty BeES (Benchmark Exchange Traded Scheme)—the first exchange traded fund (ETF) in India seeks to provide investment returns that closely correspond to the total returns of securities as represented by the S&P CNX Nifty Index. Nifty BeES, a combination of a share and a mutual fund unit, trades on the capital market segment of NSE (National Stock Exchange). Each Nifty BeES unit is 1/10th of the S&P CNX Nifty Index value. Nifty BeES units are traded and settled in dematerialised form like any other share in the rolling settlement. Thus, it allows you to trade real-time on NSE and gives you real-time indicative NAV (net asset value).
Nifty BeES offers the benefits of diversification, index tracking and low expenses. Nifty BeES can be bought / sold like a share through any NSE terminal at prices available on the screen. The underlying portfolio of Nifty BeES very closely replicates that of the S&P CNX Nifty. Hence, Nifty BeES tracks the movement of S&P CNX Nifty.
Nifty BeES is a no load scheme. The annual expense ratio including management fees is a maximum of 0.80% of the Daily Average Net Assets, which is one of the lowest for any mutual fund scheme in India. The costs reduce further to 0.65%, for assets over Rs.5 billion.
What are the advantages?
- Instant Diversification
- Equitable Structure
As it is listed and traded on the NSE, Nifty BeES can be bought / sold throughout the trading day just by a call to your broker. This gives you the power to react swiftly to changes in the market. You can even place limit orders. Nifty BeES can be held in your DP (depository participant) account with other portfolio holdings.
The structure of Nifty BeES attracts liquidity from various sources such as buying / selling by investors. The performance of Nifty BeES is simply the result of performance of shares in the S&P CNX Nifty Index and demand & supply in the market. There is no fund manager bias.
As Nifty BeES replicates the S&P CNX Nifty, investors can know at any given point of time where and how much is invested in each stock. Investing in just one unit gives exposure to fifty shares of the S&P CNX Nifty. This allows investors to spread risk with one single decision.
The unique “in-kind” mechanism of creating / redeeming Nifty BeES by exchanging a pre-defined portfolio ensures that long-term investors do not bear the cost of short term trading as observed in traditional Open-ended structure. This insulates long-term investors from short-term trading activity.
Investing in an ETF is much simpler compared to investing in a stock or actively-managed mutual fund. One can also consider doing an SIP in Nifty BeES.
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