A CASE STUDY ON EXCHANGE-TRADED FUNDS IN INDIA: UNTAPPED INVESTMENT ALTERNATIVE FOR RETAIL INVESTORS
Dr. Mahesh Sarva
Associate Professor, School of Business, Lovely Professional University, Punjab, India
Dr. Praveen Dubey
Associate Professor, DIT University, Faculty of Management Studies, Dehradun, India
Prof. Vikas Sharma
Assistant Professor, Lala Lajpatrai Institute of Management
Prof. Aditya Khandwe
Assistant Professor, Lala Lajpatrai Institute of Management
Abstract:
The Asset under management in the mutual fund industry in India has seen tremendous growth in the past five years. From 10 trillion in 2016, it reached 35 trillion as of July 31, 2021.As per the data of association of mutual fund of India retail investor participation systematic investment plan contribution in mutual funds in August 2021 touched an all-time high of 9923.15 crores. Though actively managed funds dominant the figure yet passive investing products such as index mutual funds and ETFs have also increased. ETFs are an innovative product that combines the feature of both share and mutual funds. Like shares, ETFs are traded on an exchange, and like mutual funds, it offers the benefit of diversification. Even after having the number of advantages of exchange-traded funds in India more awareness and appetite need to be created to consider this as an alternative for generating wealth in long term by the retail investor. Rather than suffering a loss in direct equity by implementing several strategies to generate alpha, it is better to have a decent return in long run by replicating the performance of the index or given financial instrument.
The increased participation in the passive investing product is showing India is entering into the matured market league. The passive segment investment is gaining traction but is still at a very nascent stage. This case tries to explore the dynamics of ETFs as an alternative product for investment by the retail investor, its advantages, and challenges. Further, it sees the various impediments and ways to increase the penetration of ETFs in the Indian market.
Keyword: Exchange Traded Funds, Index, Mutual Fund, Diversification, Retail Investor, Passive Investment, Penetration