What is NIFTY BEES - ETF?

NIFTY BEES - is the first ETF (Exchange Traded Fund) in India, which seeks to provide investment returns that closely correspond to the total returns of securities as represented by the S&P CNX Nifty Index. It gives you the most diversified exposure at lowest possible unit size. Approximately value of Nifty bees will be 1/10th value of the prevailing Nifty price.

ETFs are one of the latest financial innovations and any new concept takes time to be known widely. Globally it took more then five to seven years before it could be of any significant size. In India, it was introduced with Rs 21 crore in size , a fraction of the mutual fund industry, it has come far with more than Rs 700 crore in size with six ETFs.


nifty bees


The Nifty BeES also scores over other index funds due to its low tracking error and expense ratio, apart from easier tradeability as it is listed in the NSE. One can also consider doing an SIP in Nifty BeES.


Some of the reasons to invest in Nifty Bees :
  • Investing in Exchange Traded Fund (ETF) is much simpler compared to investing in a stock or actively-managed mutual fund.
  • So in terms of investor preparedness, ETFs shall come before direct stock investments and active mutual funds.
  • By investing in a broad market ETF, one is buying market and hence one needs to have a view about only the direction of broad market and nothing else.
  • While buying a single stock, one has to analyze the stock, management quality, future prospects and current valuation, which is not the case in ETF.
These are enough reasons to justify that small and retail investors should take the route of Nifty Bees, for investing in Equity Markets.

25 comments:

  1. hi sir,
    nice and useful article.instead of buying individual stocks, i can buy this nifty bees some quantity in each fall and hold.

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  2. AnonymousJune 15, 2009

    Lay investors can just play safe by starting with ETFs, but remember ETFs meet different needs of all types of investors (be it big, small, retail, institutional, etc).
    Hwever for small investor this low cost vehicle is a boom, and it helps them to play the market at various levels and take bold moves. In today's context no stock is 100% safe .....remember the Satyam episode or even Reliance case or any other corporate news impacting stock prices.
    Stock prices can go to near zero levels. Whereas an investment in index ETF cannot go to exponentially low levels....it can go as low or a little lower than its benchmark index....thats all. It cannot start trading in single digits because index cannot drop to those levels.....even if such a devastating crisis-like situation happens trading systems will be halted until normalcy is restored.
    So its always advisable to go for index ETFs which give instant diversification than mutual funds or stocks. ETF is also good vehicle for taking exposure to Gold....this exposure is a good hedge against equity market and inslates investor from inflation

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  3. Can any one Say the brokerage for ETF? Is this just like equity brokerage? Can it be traded intraday?

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  4. Yes, the brokerage for ETF is just like equity brokerage.
    It can be traded intraday, though not advised.

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  5. Today the Nifty BeEs closed at about 615 and Nifty 50 ( the index ) closed at about 6086. My understanding says, Nifty BeEs is 1/10 th value of Nifty 50, thats a replica of the NSE index...Why is there been so much difference in the close today. For instance Gold ETF's are properly priced and taded, but my observence with Nifty BeEs has always been , with regard to such difference. Can any1 clear my doubt on this !????

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  6. @Rahul, The difference is because, Nifty Bees includes dividends received from nifty companies.
    Also the Benchmark mutual fund, now and then declares dividends/bonus units to make the price even with Nifty.

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  7. The article is very informative one. A beginner can safely invest, as said in the article, to beat inflation.

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  8. AnonymousJune 18, 2011

    wat are the aspects of multiple time growth in nifty bees, i mean money cant grow to double

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  9. @If the index, nifty in this case, goes up- nifty bees would go up in similar value.
    One has to buy Nifty bees when the market (nifty) is fundamentally cheap. When this article was published, nifty was trading around 250 and now it 550.

    ETFs are yet to catch up with retail investors.

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  10. Melly ThomasSeptember 07, 2011

    Can you please tell me what ways SIP investments in Nifty Bees is better than an SIP in a Large Cap Fund. Also, tell me the associated costs in doing SIP in Bees?

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  11. @Melly Thomas,
    SIP in Nifty bees is little difficult to implement since it involves manual buying of units every month on the stipulated date, whereas an SIP in a Mutual funds takes care of its own.

    Why Nifty bees would be better is that, there are chances of under-performance from any actively managed fund.

    Regarding costs- it is the brokerage charged by your broker, which is around 0.5%.
    If you have any other queries/doubts, pl use the contact form, will be glad to answer them.

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  12. [a] Will you please explain that what is the Market Capitalization of Nifty Bees and How many Quantities of Nifty Bees are available in Free Float Market? How much one can buy? Up to Rs.1 lac or Rs.1 Crore or Rs.1000 Crore or what is the limit either in Rs. Value or Quantities of Nifty Bees.

    [b] I am not able to understand that who is the sole owner of Nifty Bees? Is it Golman Sachs or NSE or SEBI or someoneels?

    Thank you very much in advance for reply!

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  13. @Ketan,
    a. Market cap is about 650cr, which is the AUM. One can buy any number of units. If you want to buy directly from the fund, it has to be minimum of 1000 units.

    b.Goldman Sachs Asset Management is the Fund manager.

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  14. Can you please tell me What is the procedure to follow if you want to start an SIP in Nifty BeEs. I have a Demat account with Kotak Securities

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  15. @ Tejaswi,
    SIP option is not available in Nifty bees. One has to manually instruct your broker every month to buy fixed number of units (say 1 or 5 units).

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  16. Can a NRI buy Niftybees??

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  17. @ Shiv,

    Yes, NRIs can buy nifty bees.
    Some of the leading private banks can help you out, in this regard. Both- bank account and broking account could be done by them.

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  18. Please can you tell me is it wise to invest in SIP mutual funds and Nifty Bees also in equal ratio around 6000 month in each.

    Gokul

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  19. @ Nirmal/Gokul

    Yes, you can invest in SIP of top mutual fund schemes as well as nifty bees.

    Mutual funds ,over longer time frame of 5-7 years have performed well. The only shortcoming with nifty bees is that, you have to invest fixed amount every month(manual process), whereas SIP is automated process.

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  20. What is the minimum number of Nifty ETF that can be purchased?

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  21. Minimum number of Nifty ETF one can purchase is 1. This is a good and ideal instrument for small investors.

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  22. Sir,
    Arbitrage trading in Nifty Bees / Nifty - Future is possible?

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  23. Arbitrage trading is possible. There are at times when nifty futures goes into big premium. Buy nifty bees(delivery) sell nifty futures.

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  24. Update:
    Arbitrage is possible when transaction costs are well covered.
    (But, basically nifty bees is a delivery product)

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  25. Thank you for the article about Nifty bees.

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