What is Nifty Bees ?
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Nifty Bees is the very first exchange traded fund (ETF) launched in India, and it tracks the Nifty 50 Index. It was introduced in India by Benchmark Asset Management in December 2001. After some change of hands, it now belongs to Nippon India Mutual Fund. The “Nifty” in its name represents the index that it tracks and Bees is short for ‘benchmark exchange traded scheme’. Let’s take a step back and take a quick look at ETFs and the Nifty 50 index.
Nifty 50 Index
The Nifty 50 index is one of the two most widely used
indices for the Indian markets, with the other being the Sensex.
The Nifty (a combination of NSE and Fifty) 50 indices, is a
diversified benchmark index that tracks the performance of the top large-cap
companies listed on the NSE. It is owned and managed by NSE Indices Limited and
as the name indicates, comprises 50 stocks covering 13 sectors. It is computed
using the free float market capitalization method and its value is calculated
in real-time. It was launched in April 1996, but its base date is November 3, 1995, and its base value is 1,000.
It is rebalanced semi-annually, and the cut-off dates are
January 31 and July 31 of each year. The index is managed by a professional
team with a 3-tiered structure as follows – Board of Directors of NSE Indices
Limited, the Index Advisory Committee (Equity) and the Index Maintenance
Sub-committee.
The Nifty 50 serves many purposes, the most important
among which are that it serves as a benchmark for portfolios, index-based derivatives and index funds. Just like the Sensex, it also provides a quick
indicator of market sentiment. You can take a look here for more information on
the Nifty 50 index.
How does Nifty Bees work?
Going back to where we left off, Nifty Bees is an ETF
that tracks the Nifty 50 index. What this means is that it invests in the
securities covered by the Nifty 50 index and seeks to “provide investment
returns that, before expenses, closely correspond to the total returns of the
securities as represented by the Nifty 50 index” although no assurances or
guarantees are provided that it will meet this objective.
How it attempts to do this is by following a passive
investment approach of investing in the constituent stocks of the Nifty 50
index, in the same proportion (except a very small percentage that is set aside
for liquidity).
How to invest in Nifty Bees
Nifty Bees can be bought and sold much like a stock via a
trading + demat account for a brokerage fee. It is listed both on NSE and BSE.
It has its own symbols and codes and transactions can be carried out anytime
during the trading day at the market price determined by demand and supply,
unlike mutual funds that can only be transacted at the close of the day.
One can buy as little as one unit of Nifty Bees at a time
and can even place limit orders (instructions to buy at or lower than a
specified price OR sell at or above a specified price) on it. Once purchased,
these securities can be held in demat form, just like a stock. Latest
market information on Nifty Bees can be found here. Because it can be easily
bought and sold through the day, Nifty Bees brings to its investors the
advantage of liquidity.
Authorized participants and large investors can buy in creation
units (minimum denomination of units that can be directly purchased or redeemed
from the AMC. For Nifty Bees, it is 50,000 units) sizes directly from the AMC.
Advantages of Nifty Bees
Nifty bees have many attractive features that make it a
good investment option for investors to gain higher returns at a lower value.
Some of such features are discussed below.
·
Simplicity
of fund- This fund is very simple like any typical ETF fund
where the investors can invest easily and trade through the Demat account and
trading account. The fund tracks its underlying Index to match its performance
with minimum possible tracking errors.
·
Ease
of trading- Investors can trade the fund in real
time during market hours. Investors can trade by providing details of the transaction
to be made to their broker through a call or by directly placing the orders
themselves through their trading account. Investors also get the benefit of
placing limit orders to minimize losses.
·
Lower
expenses- ETFs generally have a lower expense
ratio as compared to many other investment products (like mutual funds). This
fund also does not have any exit load as found in the case of many mutual
funds. The expense ratio for Nifty bees is tabled below.
·
Higher
liquidity- Being able to be traded like any
individual stock, this fund gives the investors the benefit of high liquidity.
Investors can get liquidity through many sources like arbitrage through index
futures, arbitrage through authorized participants with the underlying shares.
·
Transparency- Investment
in Nifty bees can be very transparent as compared to other types of
investments. Investors can get information about the exact position or exact
investment in every security of the fund at any point in time.
- Nifty Bees is the very first ETF
introduced in India and was launched in
- It tracks the Nifty 50
- It is listed both on NSE and BSE
and can be bought and sold like
- Each unit represents 1/100 of the
Nifty 50
- Offers investors the advantages of
diversification, transparency and
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