Best ETFs in India

Imagine you're at a bustling Indian bazaar, surrounded by colourful stalls offering everything from spices to textiles. You want to take a piece of this vibrant market home with you, but carrying all those individual items seems overwhelming. Now, picture someone offering you a beautifully packaged gift basket containing a sample of the best items from each stall. That's essentially what an Exchange Traded Fund (ETF) does for your investment portfolio.

ETFs have become increasingly popular in investing, especially in India. They offer a way to invest in diverse assets without the hassle of picking individual stocks or bonds. But what exactly are ETFs, and why should you consider them for your investment journey?

What Are ETFs?

An ETF, or Exchange Traded Fund, is like a financial smoothie. It blends various investment ingredients into one easy-to-drink package. An ETF is a type of investment fund that trades on stock exchanges, just like individual stocks. But instead of representing a single company, an ETF typically holds a collection of stocks, bonds, or other assets.

Think of an ETF as a basket filled with different fruits. Each fruit represents a different stock or asset. Buying a share of an ETF is like buying a slice of that fruit basket. You get a little of everything inside rather than buying each fruit separately.

ETFs are designed to track the performance of a specific index, sector, commodity, or other asset class. For example, a Nifty 50 ETF would aim to mirror the performance of India's Nifty 50 index, which represents 50 of the largest Indian companies.

List of 15 Best ETFs in India

India's ETF market has grown significantly in recent years, offering investors various options. Here's a list of 15 top-performing ETFs in India, based on their past returns as of August 30, 2024:

Data as of August 30, 2024, between 12:00 pm - 1 pm 

Best ETFs to buy in 2024

Based on the latest performance data, here's an overview of the 15 best ETFs in India:

1. Nippon India ETF Junior BeES (JUNIORBEES)

○ NAV: ₹803.01
○ Returns: 1 Year: 68.82% | 3 Years: 89.33% | 5 Years: 195.25%
○ Tracks the Nifty Next 50 Index
○ Offers exposure to the next 50 largest companies after the Nifty 50
○ Excellent long-term performance, suitable for growth-oriented investors

2. SBI NIFTY NEXT 50 ETF (SETFNN50)

○ NAV: ₹795.89
○ Returns: 1 Year: 68.70% | 3 Years: 86.66% | 5 Years: 192.84%
○ Also tracks the Nifty Next 50 Index
○ Provides similar exposure to potential future large-cap stocks
○ Strong performer across all time frames

3. KOTAK NV 20 ETF (KOTAKNV20)

○ NAV: ₹162.74
○ Returns: 1 Year: 44.76% | 3 Years: 74.18% | 5 Years: 192.86%
○ Tracks the Nifty50 Value 20 Index
○ Focuses on value stocks within the Nifty 50
○ Impressive long-term performance, appealing to value investors

4. Invesco India NIFTY ETF (IVZINNIFTY)

○ NAV: ₹2,834.85
○ Returns: 1 Year: 31.11% | 3 Years: 56.10% | 5 Years: 139.43%
○ Tracks the Nifty 50 Index
○ Offers exposure to India's top 50 companies
○ Solid performance across all time periods

5. Motilal Oswal M50 ETF (MOM50)

○ NAV: ₹258.98
○ Returns: 1 Year: 31.76% | 3 Years: 55.09% | 5 Years: 142.32%
○ Tracks the Nifty 50 Index
○ Another option for exposure to India's 50 largest companies
○ Consistent performance, especially over the long term

6. Quantum Nifty ETF (QNIFTY)

○ NAV: ₹2,726.00
○ Returns: 1 Year: 31.88% | 3 Years: 55.06% | 5 Years: 142.74%
○ Also tracks the Nifty 50 Index
○ Offers similar exposure to large-cap Indian stocks
○ Strong and consistent performance across time frames

7. IDFC NIFTY ETF (IDFNIFTYET)

○ NAV: ₹273.97
○ Returns: 1 Year: 30.89% | 3 Years: 54.80% | 5 Years: 153.92
○ Tracks the Nifty 50 Index
○ Newer ETF with limited long-term data
○ Solid short and medium-term performance

8. SBI NIFTY 50 ETF (SETFNIF50)

○ NAV: ₹265.57
○ Returns: 1 Year: 31.78% | 3 Years: 53.92% | 5 Years: 134.82%
○ Tracks the Nifty 50 Index
○ Managed by SBI Funds Management
○ Consistent performer across all time periods

9. Invesco India Gold ETF (IVZINGOLD)

○ NAV: ₹6,339.95
○ Returns: 1 Year: 21.60% | 3 Years: 49.98% | 5 Years: 81.97%
○ Tracks domestic gold prices
○ Provides exposure to gold without physical ownership
○ Moderate returns, useful for portfolio diversification

10. Kotak Nifty Bank ETF (BANKNIFTY1)

○ NAV: ₹527.40
○ Returns: 1 Year: 16.72% | 3 Years: 43.55% | 5 Years: 88.15%
○ Tracks the Nifty Bank Index
○ Offers focused exposure to the banking sector
○ Moderate short-term returns but strong long-term performance

11. Nippon India ETF Shariah BeES (SHARIABEEE)

○ NAV: N/A
○ Returns: 1 Year: 38.24% | 3 Years: 34.56% | 5 Years: 137.83%
○ Tracks the Nifty50 Shariah Index
○ Offers Shariah-compliant investment in large-cap stocks
○ Strong performer, especially in the short and long term

12. SBI 10 YEAR GILT ETF (SETF10GILT)

○ NAV: ₹237.20
○ Returns: 1 Year: 8.82% | 3 Years: 15.33% | 5 Years: 21.50%
○ Tracks 10-year Government of India bonds
○ Provides exposure to government securities
○ Lower but more stable returns, suitable for conservative investors

13. Edelweiss ETF - Nifty Bank (EBANK)

○ NAV: ₹4,531.74
○ Returns: 1 Year: 18.5 | 3 Years: 14.29% | 5 Years: 38.16%
○ Tracks the Nifty Bank Index
○ Offers exposure to the banking sector
○ Limited short-term data, moderate long-term performance

14. UTI BSE Sensex ETF (SENSEXETF)

○ NAV: ₹895.20
○ Returns: 1 Year: 27.7% | 3 Years: 14.90% | 5 Years: 18.2%
○ Tracks the BSE Sensex
○ Provides exposure to 30 largest and most actively traded stocks on BSE
○ Moderate performance across all time frames

15. CPSE ETF (CPSEETF)

○ NAV: ₹103.60
○ Returns: 1 Year: 113.2% | 3 Years: 59.1% | 5 Years: 35.3%
○ Tracks the Nifty CPSE Index
○ Invests in Central Public Sector Enterprises
○ Exceptional short-term performance, solid medium-term returns

These ETFs offer diverse investment options, covering various indices, sectors, and asset classes. The Nifty Next 50 and Value 20 ETFs have shown strong performance across all time frames. Nifty 50 ETFs offer consistent returns, while sector-specific and thematic ETFs like Gold, Banking, and Shariah-compliant options provide targeted exposure. The CPSE ETF stands out with its exceptional short-term performance. When choosing among these ETFs, investors should consider their risk tolerance, investment horizon, and overall portfolio strategy.

Types of ETFs

ETFs come in various flavours, each catering to different investment strategies and goals. Here are some common types of ETFs available in India:

Equity ETFs: These track stock market indices like the Nifty 50 or BSE Sensex.

Debt ETFs: These invest in fixed-income securities like government or corporate bonds.

Gold ETFs: These track gold prices, offering a way to invest in gold without physical ownership.

International ETFs: These provide exposure to foreign markets or global companies.

Sector ETFs: These focus on specific industries like banking, IT, or pharmaceuticals.

Smart Beta ETFs: These use alternative weighting schemes based on factors like volatility or momentum.

ETFs vs Mutual Funds

While both ETFs and mutual funds offer ways to invest in a diversified portfolio, they have some key differences:

Trading: ETFs trade like stocks throughout the day, while mutual funds are priced and traded once daily after market close.

Minimum Investment: ETFs often have lower minimum investment requirements compared to mutual funds.

Costs: ETFs typically have lower expense ratios than actively managed mutual funds.

Transparency: ETFs disclose their holdings daily, while mutual funds usually do so monthly or quarterly.

Tax Efficiency: ETFs are generally more tax-efficient due to their structure and lower turnover.

For example, if you want to invest ₹5,000 in the Nifty 50, you could buy about 18 units of Nippon India ETF Nifty 50

BeES (assuming a price of ₹276 per unit). With a mutual fund, you might need a higher minimum investment, sometimes ₹5,000 or more.

ETFs vs Equity Stock

While both ETFs and individual stocks are traded on exchanges, they differ in several ways:

Diversification: An ETF provides instant diversification across multiple stocks while buying individual stocks requires building your own diversified portfolio.

Risk: ETFs generally carry lower risk due to diversification, while individual stocks can be more volatile.
Management: ETFs are professionally managed to track an index, while individual stocks require more active management from the investor.

Dividends: ETFs may pay dividends from multiple companies, while individual stocks pay dividends from a single company.

For instance, buying Nippon India ETF Nifty 50 BeES shares gives you exposure to all 50 companies in the Nifty 50 index. To achieve the same diversification with individual stocks, you'd need to buy shares of all 50 companies separately.

How to Invest in ETFs

Investing in ETFs is relatively straightforward. Here's a step-by-step guide:
Open a Demat and Trading Account: You'll need these accounts to buy and hold ETFs. Many brokers offer online account opening.

Choose Your ETFs: Research and select ETFs that align with your investment goals and risk tolerance.

Place an Order: Log into your trading account, search for the ETF you want to buy, and place a buy order. You can choose between market orders (buy at current market price) or limit orders (buy only at a specified price or lower).

Monitor and Rebalance: Keep track of your ETF investments and rebalance your portfolio as needed to maintain your desired asset allocation.

For example, if you want to invest in the Nifty 50 index, you could search for "NIFTYBEES" in your trading platform and place an order for the number of units you want to buy.

Remember, it's always wise to start with a small investment and gradually increase as you become more comfortable with ETF investing.

Conclusion

ETFs offer a unique blend of diversification, cost-effectiveness, and flexibility, making them an attractive option for many investors in India. From broad market exposure to sector-specific strategies, from domestic markets to international ones, ETFs provide a wide range of investment opportunities.

Remember, successful investing is not just about picking the right investments but also about maintaining a disciplined approach, regularly reviewing your portfolio, and staying aligned with your financial goals.