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A study by Zerodha MF reveals that 13% of MF AUM comes from ETFs. Out of the total MF AUM of Rs 53.40 lakh crore, Rs 6.95 lakh crore comes from ETFs in March 2024.
The report said that there were 5.33 lakh accounts (across equity and debt ETFs) in 2017 which have grown to 1.25 crore in 2023. The increase in the number of ETF accounts is due primarily to retail participation, and can be attributed to the lower costs, diversification and ease of trading in ETFs.
The trading volume of ETFs has surged from Rs 26,139 crore in FY 2017 to Rs 1.84 lakh crore in FY 2024, an increase of over 600%.
Among ETF indices, Nifty 50 ETF, Nifty Next 50 ETF and Nifty Midcap 150 ETF alone contribute more than 99% of total AUM among all equity ETF schemes. As on March 31, 2024, Nifty 50 ETFs contributes Rs 2.77 lakh crore, followed by Nifty Next 50 with Rs 9,600 crore and Nifty Midcap 150 contributes Rs. 2,285 crore. The distribution of AUM across various indices is indicative of a diversification trend among equity ETF investors.
In the press note, Vishal Jain, CEO, Zerodha MF said, “The ETF market in India is poised for continued growth. As more investors recognize the advantages of ETFs, the segment is likely to see increased inflows and diversification. The trend in passive investing is expected to persist, driven by retail investors in the coming years, as passive products are easy to understand, transparent & affordable”.
Other data points indicating ETFs increased demand among investors:
- The AUM for equity ETFs has consistently increased, going from Rs 43,234 crore in March 2017 to Rs 5.6 crore in March 2024, the highest among all categories of ETFs
- Debt ETFs have grown from Rs 1,497 crore in March 2017 to Rs 96,163 crore in March 2024. The growth in debt ETFs has accelerated particularly from March 2019 onwards, indicating an increasing shift towards fixed-income securities in recent years
- Gold ETFs have grown steadily from Rs 5,480 crore in March 2017 to Rs. 31,224 crore in March 2024
