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EXCHANGE-TRADED FUND (ETF):
An ETF is basically an index mutual fund scheme with a littledifference
The main difference between an index fund and an ETF is this: an ETFis always listed and traded on an exchange; whereas an index fundhas to be bought/sold directly with the particular Mutual Fundcompany or through a mutual fund agent/distributor
An ETF is linked to a benchmark index like any index fund
An ETF can be bought and sold through an exchange like any share
To buy an ETF, one requires a demat account and a trading accountwith a broker to buy/sell on the particular exchange where the ETF islisted/traded; whereas for buying an index fund, investor does notrequire a demat account and she can directly approach the mutualfund for buying or selling the index fund units
SALIENT FEATURES OF NIFTY BeES:
One unit of NIFTY BeES is equal to one-tenth of the value of S&P CNXNifty Index. On 29.09.09, Nifty 50 index has closed at 5,007; whereas,NIFTY BeES was quoting at Rs 498 on day’s closing. The smalldifference (technically called tracking error) between the underlying Niftyindex and NIFTY BeES is due to the supply and demand factors of NIFTYBeES on NSE. On 29.09.09, its day’s high was Rs 500 and day’s low wasRs 495. During the trading hours, the price of NIFTY BeES will fluctuatein tune with the movement of Nifty 50 index.
If the NIFTY Index goes up to 6,000 in the next six months, the value ofone unit of NIFTY BeES will go up to Rs 600 or if the Nifty Index retracesto 4,500, then the value of one unit of NIFTY BeES will be readjusted toRs 450 in tune with the movement of the general market
The structure of Nifty BeES is such that it does not hurt long-terminvestors from the inflow and outflow of short-term investors. This isbecause the Fund does not bear extra transaction cost when buying / selling due to frequent subscriptions and redemptions.
It is traded only on the NSE (face value Rs 10) & it is India’s first ETF
It is managed by the AMC of Benchmark Mutual Fund, which is sponsoredby one Niche Financial Services Pvt. Ltd. The fund manager is VishalJain. This Mutual Fund maintains other ETFs also – like, Gold, Bank,Derivatives and others. The total average assets under management bythe Benchmark MF are Rs 1,213 crore as on 31
of August, 2009.