Exchange-traded funds (ETFs) are gaining in popularity across India, and tier-2 towns are showing a higher interest for ETFs, according to a new survey by Mirae Asset Mutual Fund.
The survey, titled ‘Decoding ETF Perceptions’ involved 2,109 investors across 15 cities covering both metros as well as tier-2 towns. The ratio of men-women respondents were 80:20.
Age wise, 40 per cent belonged to the 22-35 years and 36 -45 years age group each, and the rest 20 per cent of respondents were in the 46-55 years age group. `
Findings revealed that more than 60 per cent of respondents surveyed said they had a good understanding of ETF products. Within ETFs, large-cap and mid-cap based ETFs were more popular and most investors considered investing in them preferably for the short term, i.e., 1-3 years.
Among ETF owners, about 21 per cent of the respondents were single, 74 per cent were married with children, and the rest 5 per cent were married with no children.
Among the ETF intenders, i.e., those who intended to buy ETFs, the corresponding percentage was 29 per cent (single), 65 per cent (married with children), and 6 per cent (married with no children).
According to the survey, ETFs were gaining in popularity in the tier-2 cities, particularly in the 36-45 year age groups. When it came to familiarity with ETFs, a huge 79 per cent of owners said they had in-depth understanding of ETFs.
Only a small 20 per cent said they had heard or read a few things about ETFs, and a miniscule 1 per cent said they did not know much about ETFs. When it came to understanding about ETFs, about 83 per cent of owners said ETFs were just like stocks or mutual funds.
Also, while owners who understood ETFs better than intenders or non-intenders were seen to invest more (11-25 per cent of the total invested amount), intenders who were still exploring the ETF category seemed to be a bit cautious.
They were majorly looking to invest only 6-10 per cent in ETFs. The duration of investment, however, was consistent across both user groups ‒ 1 to 3 years, the research revealed.
For both owners and intenders, liquidity was a major factor while selecting an ETF – 68 per cent for owners and 73 per cent for intenders, the survey said.
For both owners and intenders, market returns was a major expectation from ETFs – 70 per cent for owners and 65 per cent for intenders.
As for the mode of investment, systematic investment plans (SIPs) were the most preferred option – 62 per cent against 22 per cent for lump sum. For the other 16 per cent, there was no fixed frequency.
“Expectation of generating market returns and outperformance to active mutual funds seem to be one of the prime motives for them to invest in ETFs.
Most investors who opt for ETFs are savvy and use investment platforms for their investment, and largely rely on bunch of personal finance websites. Liquidity, market speed and innovative products are the key factors which are driving the
ETFs market, while hidden risks and relative lack of knowledge are the main barriers which the industry needs to address, the survey findings indicated,” the survey said.
Swarup Mohanty, vice chairman and CEO, Mirae Asset Investment Managers (India) said: “ETFs are fast emerging as popular investment tools among Indian mutual fund investors because of their transparency as well as market speed.
It is heartening to note that smaller towns are also emerging as ETF investment hubs which augurs well for the overall market. Learnings from this report will not just provide valuable insights of the investors who are already investing in ETFs, but also learn what the intenders are looking forward from the ETF providers, this survey may overall benefit ETF Industry in India.”
