"BeEs (Benchmark Exchange Traded

Scheme)”

About Exchange Traded Funds

ETFs are just what their name implies: baskets of securities that are traded, like
individual stocks, on an exchange.

Unlike regular open-end mutual funds, ETFs can be bought and sold throughout the
trading day like any stock.

Advantages of ETFs
Advantages over traditional open-ended index funds as follows:
• intra-day purchase and sale on the Exchange
• closely tracks the performance of an index throughout the day with the ability to
buy/sell at any time, whereby trading opportunities that arise during a day may
be better utilized.
• low cost.
• ETFs are structured in a manner which allows Authorized Participants and Large
Institutions to create new units and redeem outstanding units directly with the
fund, thereby ensuring that ETFs trade close to their actual NAVs.
• ETFs are like any other index fund, wherein, subscription / redemption of units
work on the concept of exchange with underlying securities instead of cash (for
large deals).
• costs of distribution are much lower and the reach is wider. These savings in cost
are passed on to the investors in the form of lower costs. Further, the structure
helps reduce collection, disbursement and other processing charges.
• ETFs protect long-term investors from inflows and outflows of short-term
investors. This is because the fund does not incur extra transaction cost for
buying/selling the index shares due to frequent subscriptions and redemptions.
• Tracking error, which is divergence between the NAV of the ETF and the
underlying Index, is generally observed to be low as compared to a normal index
fund due to lower expenses and the unique in-kind creation / redemption process.
• ETFs are highly flexible and can be used as a tool for gaining instant exposure to
the equity markets, equitising cash or for arbitraging between the cash and
futures market.

Comparison of ETFs with other mutual

funds
ETFs Vs. Open Ended Funds Vs. Close Ended Funds
Parameter Open Ended Fund Closed Ended Fund Exchange Traded Fund
Fund Size Flexible Fixed Flexible
NAV Daily Daily Real Time
Liquidity Fund itself Stock Market Stock Market / Fund itself
Provider
Sale Price At NAV plus load, if Significant Premium / Very close to actual NAV of
any Discount to NAV Scheme
Availability Fund itself Through Exchange Through Exchange where
where listed listed / Fund itself.
Portfolio Monthly Monthly Daily/Real-time
Disclosure
Uses Equitising cash - Equitising Cash, Hedging,
Arbitrage
Intra-Day Not possible Expensive Possible at low cost
Trading

Creations & Redemptions

ETFs are different from Mutual funds in the sense that ETF units are not sold to the
public for cash.

Instead, the Asset Management Company that sponsors the ETF (Fund) takes the shares
of companies comprising the index from various categories of investors like authorized
participants, large investors and institutions.

In turn, it issues them a large block of ETF units. Since dividend may have accumulated
for the stocks at any point in time, a cash component to that extent is also taken from
such investors. In other words, a large block of ETF units called a "Creation Unit" is
exchanged for a "Portfolio Deposit" of stocks and "Cash Component".

The number of outstanding ETF units is not limited, as with traditional mutual funds. It
may increase if investors deposit shares to create ETF units; or it may reduce on a day if
some ETF holders redeem their ETF units for the underlying shares. These transactions
are conducted by sending creation / redemption instructions to the Fund. The Portfolio
Deposit closely approximates the proportion of the stocks in the index together with a
specified amount of Cash Component. This "in-kind" creation / redemption facility
ensures that ETFs trade close to their fair value at any given time.

Some investors may prefer to hold the creation units in their portfolios. While others
may break-up the creation units and sell on the exchanges, where individual investors
may purchase them just like any other shares.

ETF units are continuously created and redeemed based on investor demand. Investors
may use ETFs for investment, trading or arbitrage.
The price of the ETF tracks the value of the underlying index. This provides an
opportunity to investors to compare the value of underlying index against the price of
the ETF units prevailing on the Exchange.

If the value of the underlying index is higher than the price of the ETF, the investors may
redeem the units to the Sponsor in exchange for the higher priced securities.

Conversely, if the price of the underlying securities is lower than the ETF, the investors
may create ETF units by depositing the lower-priced securities. This arbitrage
mechanism eliminates the problem associated with closed-end mutual funds viz. the
premium or discount to the NAV.

Structure of ETF
Applications of ETFs
• Efficient Trading:  ETFs provide investors a convenient way to gain market
exposure viz. an index that trades like a stock. In comparison to a stock, an
investment in an ETF index product provides a diversified exposure to the market.
Depending on the index, investors may obtain exposure to countries/ markets or
sectors.
• Equitising Cash: Investors with idle cash in their portfolios may want to invest in
a product tied to a market benchmark like an index as a temporary investment
before deciding which stocks to buy or waiting for the right price.
• Managing Cash Flows: Investment managers who see regular inflows and outflows
may use ETFs because of their liquidity and their ability to represent the market.
• Diversifying Exposure: If an investor is not sure about which particular stock to
buy but likes the overall sector, investing in shares tied to an index or basket of
stocks provides diversified exposure and reduces stock specific risk.
• Filling Gaps:  ETFs tied to a sector or industry may be used to gain exposure to
new and important sectors. Such strategies may also be used to reduce an
overweight or increase an underweight sector.
• Shorting or Hedging: Investors who have a negative view on a market segment or
specific sector may want to establish a short position to capitalize on that view.
ETFs may be sold short against long stock holdings as a hedge against a decline in
the market or specific sector.

Types of ETF (BeEs)

1. Equity
Equity ETFs are passive investment instruments that are based on indices and invest in
securities in same proportion as the underlying index.

Because of its index mirroring property, there is a complete transparency on the holdings
of an ETF.

The ETFs have much lower expense ratios as compared to mutual funds.

List of Equity ETFs listed on NSE

Issuer Name Name Symbol Underlying Launch
Date
Edelweiss AMC Edelweiss Exchange Traded NIFTYEES NIFTY 50 08-
Scheme - NIFTY Index May-201
5
ICICI Prudential ICICI Prudential NIFTY ETF INIFTY NIFTY 50 20-
AMC Index Mar-2013
Kotak AMC Kotak NIFTY ETF KOTAKNIFTY NIFTY 50 02-
Index Feb-2010
Motilal Oswal AMC MOSt Shares M50 M50 NIFTY 50 28-
Index Jul-2010
Quantum AMC Quantum Index Fund - Growth QNIFTY NIFTY 50 10-
Index Jul-2008
Religare AMC Religare Invesco NIFTY ETF RELGRNIFTY NIFTY 50 13-
Index Jun-2011
SBI AMC SBI ETF NIFTY SETFNIFTY NIFTY 50 23-
Index Jul-2015
UTI AMC UTI NIFTY ETF UTINIFTETF NIFTY 50 03-
Index Sep-2015
Birla Sun Life AMC Birla Sun Life NIFTY ETF BSLNIFTY NIFTY 50  21-
Index Jul-2011
ICICI Prudential ICICI Prudential CNX 100 ETF ICNX100 NIFTY 100 20-
AMC Aug-2013
Kotak AMC Kotak Banking ETF KOTAKBKETF NIFTY Bank 04-
Dec-2014
SBI AMC SBI ETF Banking SETFBANK NIFTY Bank 20-
Mar-2015
Motilal Oswal AMC MOSt Shares M100 M100 NIFTY 31-
Midcap 100 Jan-2011
SBI AMC SBI ETF NIFTY Junior SETFNIFJR NIFTY Next 20-
50 Mar-2015
Kotak AMC Kotak PSU Bank ETF KOTAKPSUBK NIFTY PSU 08-
BANK Nov-2007
ICICI Prudential ICICI SENSEX Prudential ISENSEX S&P BSE 10-
AMC Exchange Traded Fund Sensex Jan-2003
UTI AMC UTI Sensex ETF UTISENSETF S&P BSE 03-
Sensex Sep-2015
Reliance Nippon Reliance ETF NIFTY BeES NIFTYBEES NIFTY 50 28-
Life Asset Index Dec-2001
Management
Limited
Reliance Nippon Reliance ETF NIFTY 100 RELCNX100 NIFTY 100 22-
Life Asset Mar-2013
Management
Limited
Reliance Nippon Reliance ETF Bank BeES BANKBEES NIFTY Bank 27-
Life Asset May-04
Management
Limited
 Reliance Nippon CPSE ETF CPSEETF NIFTY CPSE 28-
Life Asset Index Mar-14
Management
Limited
Reliance Nippon Reliance ETF Dividend RELDIVOPP NIFTY 15-
Life Asset Opportunities Dividend Apr-14
Management Opportuniti
Limited es 50
Reliance Nippon Reliance ETF Consumption RELCONS NIFTY India 03-
Life Asset Consumptio Apr-14
Management n
Limited
Reliance Nippon Reliance ETF Infra BeES INFRABEES NIFTY 29-
Life Asset Infrastructu Sep-10
Management re
Limited
Reliance Nippon Reliance ETF Junior BeES JUNIORBEES NIFTY Next 21-
Life Asset 50 Feb-03
Management
Limited
Reliance Nippon Reliance ETF PSU Bank BeES PSUBNKBEES NIFTY PSU 25-
Life Asset BANK Oct-07
Management
Limited
ICICI Prudential BHARAT 22 ETF BHARATIWIN S&P BSE 28-
AMC BHARAT 22 Nov-17
index

2. Gold
Gold ETFs are passive investment instruments that are based on gold prices and invest in
gold bullion.

Because of its direct gold pricing, there is a complete transparency on the holdings of an
ETF.

Further due to its unique structure and creation mechanism, the ETFs have much lower
expenses as compared to physical gold investments.

List of Gold ETFs listed on NSE

Issuer Name Symbol Underly Launc
ing h
Date
 Axis Mutual Fund Axis Gold ETF AXISGOLD Gold Nov
2010
Birla Sun Life Mutual Birla Sun Life Gold ETF BSLGOLDETF Gold May
Fund 2011
Canara Robeco MF Canara Robeco Gold ETF CANGOLD Gold Mar
2012
HDFC Mutual Fund HDFC Gold Exchange Traded HDFCMFGETF Gold Aug
Fund 2010
ICICI Prudential ICICI Prudential Gold Exchange IPGETF Gold Aug
Mutual Fund Traded Fund 2010
IDBI AMC IDBI Gold ETF IDBIGOLD Gold Nov
2011
Kotak Mutal Fund Kotak Gold Exchange Traded KOTAKGOLD Gold Jul
Fund 2007
Quantum Mutual Quantum Gold Fund (an ETF) QGOLDHALF Gold Feb
Fund 2008
Reliance Mutual Fund Reliance Gold Exchange Traded RELGOLD Gold Nov
Fund 2007
Religare Mutual Fund Religare Gold Exchange Traded RELIGAREGO Gold Mar
Fund 2010
SBI Mutual Fund SBI Gold Exchange Traded SBIGETS Gold Apr
Scheme 2009
UTI Mutual Fund UTI GOLD Exchange Traded GOLDSHARE Gold Mar
Fund 2007
Reliance Nippon Life Reliance ETF Gold BeES GOLDBEES Gold Mar 07
Asset Management
Limited

3. World Indices
Global Equity Exchange Traded Funds (ETFs) are simple investment products that allow
the domestic investors to take an exposure to international indices.

Issuer Name Symbol Underlying Launc

h
Date
Motilal Oswal AMC MOSt Shares NASDAQ 100 N100 Nasdaq 100 29-
Mar-2
011
Reliance Nippon Life Reliance ETF Hang Seng HNGSNGBE HangSeng Mar
Asset Management BeES ES 10
Limited
4. Debt
Debt Exchange Traded Funds (ETFs) are simple investment products that allow the
investors to take an exposure to the fixed income securities.

These debt ETFs combine the benefits of debt investments with the flexibility of stock
investment and the simplicity of mutual funds. These Debt ETFs trade on the cash
market of the National Stock Exchange, like any other company stock, and can be
bought and sold continuously at live market prices.

List of Debt ETFs listed on NSE

Issuer Name Symbol Underlying Launch
Date
LIC Nomura AMC LIC Nomura MF G-Sec LICNMFET Nifty 8-13 26-
Long Term ETF - Reg - yr G-Sec Dec-2014
Growth
Index
Reliance Nippon Life Reliance ETF Long Term RRSLGETF NIFTY 4-8 yr Jul 16
Asset Management Gilt G-Sec Index
Limited