December 26, 2003

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December 26, 2003
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Introduction to Nifty BeES

• First Exchange Traded Fund (ETF) in India
• Combination of a share and a mutual fund unit
• Real-time Trading on NSE
• Real-time Indicative NAV on website
  www.benchmarkfunds.com
• Available across 3000 NSE terminals in 350 cities
• Tracks the SP CNX Nifty Index
• Priced at 1/10th of the Nifty Index

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History of ETFs

• First ETF came in 1993 on SP500 called SPDRs
• SPDRs and QQQs (ETF on Nasdaq 100) are the most
  actively traded ETFs
• Globally, there are currently 277 ETFs with 382
  listings on 28 exchanges around the world
• On November 29 , 2003 the ETF market globally was
  190.26 billion (Source MSDW)
• ETFs launched across the world include Japan in
  September 2001 and in Korea and Singapore in
  2002
• Nearly 60 of trading volumes on American Stock
  Exchange comprises of ETFs

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Growth of ETFs
Source Bloomberg, Morgan Stanley Research
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How Nifty BeES work
Secondary market
Primary market
Seller
Nifty BeES
Cash
Authorised Participants / Financial Institutions
Buy / sell
NSE
Market making / Arbitrage
Creation in-kind
Redemption in-kind
Nifty BeES
Cash
Buyer
Fund
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ETF Liquidity
Underlying Equity (Creation / Redemption Process)
Futures
ETF Liquidity
Intra-day Buy/Sell
The notional liquidity of an ETF is the average
volume of the underlying.
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Index tracking a long term winner

• It has been proved that It is not possible to
  consistently outperform the overall stock market
• In the last 20 years, 85 of actively managed
  funds have under performed the SP 500 in US
• Due to this, approximately 25 of the invested
  assets in the U.S. is indexed
• Index tracking is relatively a cheaper strategy
  to implement
• Indices are dynamic, transparent and have high
  investor recall
• No fund manager risk, but pure equity market
  exposure

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Nifty BeES Advantages

• Simple Can be bought/ sold on NSE like a
  sharereal-time
• Economical No load scheme. Annual expense ratio
  including management fees is a maximum 0.80 of
  the daily average net assets. One of the lowest
  for any mutual fund scheme in India.
• Diversification Its a cost efficient way to
  invest in a basket of securities
• Equitable Structure Long term investors
  insulated from short term trading activity
• Transparent Investors have access to
  information on the portfolio constituents
  represented represented on a daily basis
• Premium/Discount to NAV Between -0.5
  (Source Business Standard)

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Tracking Error
Annualized Six-month Tracking Error (TE)
calculated as on August 27, 2003
Source The Economic Times Mumbai, 15 September
2003
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Nifty BeES vs. Open ended Index funds
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Independent Research Review
Nifty BeES seems the best index fund when it
comes to all three parameters Entry loads,
Expense ratios and Tracking Error.It is Indias
first and only Exchange Traded Fund or simply
put, a next generation index fund. - Business
World, September 30, 2002 Investing in Nifty
BeES is a comparatively better method of
participating in any market rally - The
Economic Times, December 2, 2002
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THANK YOU