Exchange-traded funds (ETFs) have taken the world by storm with many investors shifting towards ETFs from conservative mutual funds. In India, the ETF landscape has gained traction since 2015 and has become much bigger and also more diverse. AUM for ETFs has grown from ₹5,400 crore in December 2014 to above ₹5 lakh crore.
Exchange-traded funds, or ETFs, are exchanged on a stock exchange and follow a commodity, an index or a portfolio of assets, such as an index fund. They have risen in popularity among investors searching for alternatives to mutual funds since their debut in 1993.
These products consist of a basket of assets meant to replicate an index and offer minimal management costs and more intraday price transparency.
With their popularity on a rise, brokerage house IIFL Securities has listed 2 ETFs you should buy this year. Let's take a look:
SBI S&P BSE SENSEX ETF: As per the brokerage, the investment objective of the scheme is to provide returns, that closely correspond to the total returns of the securities as represented by holding S&P BSE SENSEX stocks in the same proportion. It has given 10 percent returns in the last 1 year and 16.7 percent returns in the past 3 years. In a 5-year time frame, it has witnessed a 15 percent return.
BSE 30 is a market index that consists of 30 well-established companies which are financially sound, stable, and are performing well in the market. These Stocks are spread across twelve sectors (BFSI, IT, Oil and gas, FMCG, Auto, Consumer Durable, Capital Goods, Utilities, etc.).
ICICI Prudential Bank Nifty ETF: The scheme represents the stocks of Bank Nifty as per its weightage in the Public Sector Banks and Private Sector Banks. It has given a 1-year return of 17.6 percent and a 3-year return of 11.6 percent. This ETF gives an opportunity for the investors to invest in one of the fastest growing sectors contributing to the growth of the Indian economy for their long-term capital growth, said IIFL
"In the ensuing period, banks are very well placed with supportive monetary stance, healthy capitalisation, improved liability profile, diversified asset mix and healthy asset quality along with strong coverage ratios. Core income to see further improvements with fee income generating activities picking up," noted the brokerage.
It sees the Loan growth to pick up from 12.5 percent CAGR from FY18-22 to 18 percent CAGR in FY22-25, driven by strong continued strength in growth from retail and service segments. Margins are likely to remain stable over FY23 - 25, NIM for large banks improved by 20-80 bps, driven by lower cost of funds, a higher share of retail and lower interest reversal, IIFL added.
It further said that the asset quality for the sector has also improved with significant improvement in the GNPA ratio down to 5.9 percent as of FY22 from its peak of 11.2 percent in FY18.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.