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NIFTY BeES-Exchange Traded Fund-VRK100-Making Risk-less Profits From it-30092009

NIFTY BeES-Exchange Traded Fund-VRK100-Making Risk-less Profits From it-30092009

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The document is authored by Rama Krishna Vadlamudi, MUMBAI (vrk_100@yahoo.co.in). NIFTY BeES (Nifty Benchmark Exchange Traded Scheme) is a mutual fund product, but it is traded on NSE like any company’s share. It is an open-ended mutual fund scheme. Like a share, one can buy/sell units of Nifty BeES on NSE (National Stock Exchange) throughout the trading hours. NIFTY BeES is traded in demat form only. One can buy NIFTY BeES from NSE through one’s broker and the units will be credited to one’s demat account on normal T+2 basis. If one desires, one can sell the units again through NSE anytime during the trading hours.

By investing through NIFTY BeES, individual investors will be relieved of the burden of poring over bulky annual reports, opaque financial statements, analyzing quarterly/periodical results minutely and scratching one’s head over declarations of bonus shares, dividends, rights issues, open offers, stock splits, etc. It is a good start with 15 or 25 per cent allocation for ETFs in one’s equity portfolio for individual investors who like passive investments.

NIFTY BeES, as of now and according to the present available information, is much superior to other index funds* that are available to investors. (*These index funds can only be bought directly from mutual fund houses and not through stock exchanges; and these index funds have unreasonable tracking errors which may dilute the overall returns in the medium/long term)
The document is authored by Rama Krishna Vadlamudi, MUMBAI (vrk_100@yahoo.co.in). NIFTY BeES (Nifty Benchmark Exchange Traded Scheme) is a mutual fund product, but it is traded on NSE like any company’s share. It is an open-ended mutual fund scheme. Like a share, one can buy/sell units of Nifty BeES on NSE (National Stock Exchange) throughout the trading hours. NIFTY BeES is traded in demat form only. One can buy NIFTY BeES from NSE through one’s broker and the units will be credited to one’s demat account on normal T+2 basis. If one desires, one can sell the units again through NSE anytime during the trading hours.

By investing through NIFTY BeES, individual investors will be relieved of the burden of poring over bulky annual reports, opaque financial statements, analyzing quarterly/periodical results minutely and scratching one’s head over declarations of bonus shares, dividends, rights issues, open offers, stock splits, etc. It is a good start with 15 or 25 per cent allocation for ETFs in one’s equity portfolio for individual investors who like passive investments.

NIFTY BeES, as of now and according to the present available information, is much superior to other index funds* that are available to investors. (*These index funds can only be bought directly from mutual fund houses and not through stock exchanges; and these index funds have unreasonable tracking errors which may dilute the overall returns in the medium/long term)

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Published by: RamaKrishna Vadlamudi on Sep 30, 2009
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Rama Krishna Vadlamudi, MUMBAI. vrk_100@yahoo.co.in. Sept. 30, 2009 
 
Page 1 of 8
NIFTY B ES (Nifty Benchmark Exchange Traded Scheme)is a mutual fund product, but it is traded on NSE like any company’s share. It is an open-ended mutual fund scheme.Like a share, one can buy/sell units of 
Nifty BeES
on NSE (National Stock Exchange) throughout the trading hours.NIFTY B ES is traded in demat form only. One can buy NIFTY B ES from NSE through one’s broker and the units will be credited to one’s demat account on normal T+2 basis.If one desires, one can sell the units again through NSE anytime during the trading hours.
Rama Krishna Vadlamudi vrk_100@yahoo.co.in MUMBAI September 30th, 2009 
FOR REGULAR UPDATES ON THE AUTHOR'S DOCUMENTS: JUST CLICK 
www.scribd.com/vrk100
 
Rama Krishna Vadlamudi, MUMBAI. vrk_100@yahoo.co.in. Sept. 30, 2009 
 
Page 2 of 8
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
st
of August, 2009.
 
Rama Krishna Vadlamudi, MUMBAI. vrk_100@yahoo.co.in. Sept. 30, 2009 
 
Page 3 of 8
Entry Load is NIL
Exit Load: With effect from August 01, 2009, Exit load (technically referredas CDSC) (if any) of up to 1% of the redemption value charged to the unitholder on redemption of units shall be retained by each of the Schemes ina separate account and will be utilized for payment of commissions tomutual fund advisors and to meet other marketing and selling expenses
It is open-ended mutual fund
For tax purposes, it’s considered as an equity-oriented mutual fund. Long-term capital gains tax (for holdings of more than one year) is NIL.
Short-term capital gains tax (for holdings of less than one year) is 15 percent, plus surcharge (if any) and 3% education cess
STT is applicable for buying and selling of units of NIFTY BeES on NSE
As NIFTY BeES is bought from NSE like any share, brokerage needs tobe paid by the investor for buy/sell transactions
Dividend distributed by AMC for NIFTY BeES is exempted from DividendDistribution Tax (DDT). Dividend is not taxable in the hands of individualresident Indian tax payers. Benchmark AMC declares dividends on NIFTYBeES, now and then. The latest dividend was Rs 4.50 per unit of NIFTYBeES paid with record date of 15.07.09. Previously dividends were Rs5.00 (12.09.08) and Rs 8.00 (05.01.07).
NSE symbol: NIFTY BEES
NIFTY is calculated using the Free Float methodology
Fifty stocks that are part of NIFTY Index are selected based on highdegree of liquidity
Assets under management as on 31.08.2009 for NIFTY BeES: Rs 214crore. As on September 29
th
, 2009; a total of 47.37 lakh units of NIFTYBeES are issued to investors.
It is highly liquid from an individual investor’s point of view
NIFTY BeES is a passively managed fund. NIFTY BeES’s underlying willbe in proportion to the weight of the constituents of Nifty 50 index.

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RamaKrishna Vadlamudi added this note
Benchmark Mutual Fund is now Goldman Sachs Mutual Fund after its takeover by Goldman Sachs. Nifty BeES' full form is now Goldman Sachs Nifty Exchange Traded Scheme.
RamaKrishna Vadlamudi added this note
How to make profits from an Exchange Traded Fund (ETF)? This article gives the required info!---VRK100
RamaKrishna Vadlamudi added this note
This document has achieved a TOTAL READS of more than 1,000. I thank all the readers for their excellent support---RK VADLAMUDI, BOMBAY
RamaKrishna Vadlamudi added this note
How to make profits from an Exchange Traded Fund (ETF)? This article gives the required info!---VRK100
RamaKrishna Vadlamudi added this note
This document has achieved a TOTAL READS of more than 1,000. I thank all the readers for their excellent support---RK VADLAMUDI, BOMBAY
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