An Introduction to NIFTY BEES

24 Jan

Exchange Traded Funds are one of the best financial tools available in the present scenario, gaining recognition globally. It took nearly 5-7 years to gain significance in India. It was introduced in India with a size of Rs. 21 crore and as of now the size has shown a significant rise to Rs. 700 crore with six ETFs.

Nifty BeES, the most popular and first Exchange Traded Fund in India was introduced by BENCHMARK, an Asset Management Company on 8^th of January, 2002. They very closely replicate S&P CNX Nifty Index of the Indian Capital Market. It provides a very wide exposure to its investors at the lowest possible unit size. Each Nifty BeES unit consist of approximately 1/10 of the S&P CNX Nifty Index value. They are traded and settled in dematerialized form, very much similar to that of share trading in the Capital Market. Benchmark Mutual Fund calculates and publicizes its real-time NAV. For updated NAV information one can visit website www.benchmarkfunds.com and Reuters Page BEES01.

Information on Nifty BeES

NSE symbol	NIFTYBEES
ISIN code	INF732E01011
Series	EQ
Reuters code	NBES.NS
Face value	Rs.10

Benefits related to Nifty BeES

1) Easily tradable: They can easily be bought and sold just like shares, at the price flashing on the trading screen through, any NSE terminal. They very closely correspond to the value of S&P CNX Nifty Index.

2) Cost-effective: They attract no load as do other mutual funds schemes do. However, the annual expense ratio along with management fees is charged up to a maximum amount of 0.80% of the Daily Average Net Assets. The cost can further be reduced to 0.65% for assets over Rs. 500 crore.

3) Convenient: As they listed and traded on NSE can also be bought and sold through telephonic conversation with broker just like equities. It provides you the facility to place limit orders and change the price with the changing market scenario. They can be held in your DP account with all your other holdings.

4) Highly liquid: Nifty BeES, are highly liquid just because it easily facilitates buying and selling, arbitrage with index futures, arbitrage by authorized participants with the underlying shares.

5) Avoids biasness: The value of Nifty BeES is totally dependent on the performance of S&P CNX Nifty along with demand and supply structure in the market, thus avoiding biasness on the part of fund manager.

6) Transparency: As they closely track the performance of S&P CNX Nifty Index, one just need to keep a track of the broad market as a whole thus leading to convenience any transparency.

7) Diversification: Staying invested with Nifty BeES allows you the benefit of staying invested with 50 scrip’s of Nifty, thus trims down the risk.

8 ) Avoid rigorous research: Staying invested with a single stock requires proper analysis of the stock, management quality, its future prospects as well as its current valuation which is precluded in case of ETFs. Further trading in a pre-defined portfolio structure provides advantage to long term investors by preventing them from the cost of short term trading involved in traditional structure.

Nifty BeES are on the top of the priority list in comparison to other index funds just because of its low tracking error and expense ratio. Further being traded and listed on NSE provided ease of transaction. Even investing through SIP in Nifty BeES can be considered a wise decision.