ETF AUMs surge on inflows from HNIs, retail investors

Exchange-traded funds (ETFs) are gaining popularity among retail and high-net-worth individual (HNI) investors, show data from the Association of Mutual Funds in India (AMFI).

The assets under management (AUM) of ETFs grew annually by 87% and 64% in the past five and 10 years respectively, compared with 18.5% and 14.5% growth in the total AUM of mutual funds.

ETFs are similar to index mutual funds but trade on bourses just like stocks. Since the launch of the first ETF in 2001, their number has increased to 82. In 2010, that number stood at 14.

Mukesh Agarwal, CEO at the NSE Indices, said that response from individual investors has been quite encouraging owing to the low cost, transparency, diversity, and liquidity of ETFs. “Individual investors (retail and HNI) account for nearly 88% of the total equity-oriented ETF AUM,” he added. The equity-oriented ETFs form 86% of the total ETF AUM.

The AUM of ETFs reached a record high of Rs 2.1 lakh crore in August 2020, equivalent to the combined AUM of the large-cap and large and midcap categories of equity funds. Nearly half of the total ETF AUMs is linked to the Nifty50 index, followed by 19.3% with the BSE Sensex and 12.3% with the Nifty Bharat Bond index.

The share of the ETF AUM in the total MF AUM rose to 7.5% in August 2020, compared with less 1% a decade ago. The expansion is the result of higher inflow in ETFs coupled with the gains in the underlying indices. In the first five months of the current fiscal, ETFs received a net inflow of Rs 19,779 crore, which is almost four times of the equity fund flow. In the previous five years, the ETF drew a net inflow of Rs 1.8 lakh crore compared with Rs 4.71 lakh crore in the equity funds.

ETFs have added 7.35 lakh folios in the past six months taking the total tally to 25 lakh, implying a monthly run-rate of 1.2 lakh compared with the large-cap funds’ folio run-rate of 92,701.