In an interesting trend, the difference between ETF inflows and equity fund inflows has narrowed in 2019-20.
AMFI data shows that net inflows in other ETF category rose by 37% to Rs.36,758 crore between April 2019 and December 2019. Meanwhile, equity funds category witnessed net inflows of Rs.53,391 crore. Equity funds include pure equity funds and ELSS.
In the corresponding period of FY 2018-19, net inflows in the other ETF category stood at Rs.26,856 crore while pure equity funds witnessed net inflow of Rs.88,822 crore.
It is pertinent to mention that Bharat Bond ETF, a corporate bond exchange traded fund has fetched over Rs 12,000 crore from its FFO in December 2019. However, even after taking out the ETF inflows from Bharat Bond, the gap between ETF inflows and equity inflows has narrowed.
DP Singh, ED and CMO (Domestic Business), SBI MF pointed out that while ETF flows have largely come from the government through EPFO, retail investors’ interest is also picking up gradually largely due to not so good performance of most active funds. He feels ETFs could see substantial inflows in 2020.
Seconding Singh, Swarup Mohanty, CEO, Mirae Asset said that inflows in ETFs could double this year. One reason could be introduction of theme based ETFs like ESG ETFs and low cost.
He further added that 2020 could be the year for both active and passive funds rather than active vs passive funds. For instance, while there are 100 stocks in the large cap basket, investors get exposure to 50 stocks if they invest in Nifty 50 ETF.
Vinod Jain of Jain Investment feels that most retail investors are yet to invest in ETFs because of requirement of demat accounts and liquidity concerns.
