An Exchange Traded Fund or ETF is a basket of stocks that mirrors an index like the Nifty 50 or Sensex. While ETFs are commonplace now, the first ever ETF in India called “Nifty BeES” was launched in 2002 by Nippon India.
What is Nifty BeES?
The Nifty Benchmark Exchange-Traded Scheme or Nifty BeEs is an ETF. It mirrors the S&P CNX Nifty index (Nifty 50). This means that Nifty BeES contains the same stocks as Nifty 50 like:
Since Nifty BeES is an ETF, it can be bought and sold just like any other stock. But there’s one catch – Nifty BeES is only available for trading and investing on the National Stock Exchange (NSE).
Once an investor buys shares of Nifty BeES, they’ll be stored in the dematerialized form in the investor’s Demat account. The investor must also have a trading account with a stockbroker to place buy/sell orders for the ETF.
How Does Nifty BeES Work?
Nifty BeES is an ETF, which means that it is designed like a mutual fund but trades like a stock. That’s why you’ll see similarities between Nifty BeES and mutual funds, starting with the existence of a fund manager.
The fund management team is responsible for buying and selling securities, which in Nifty BeEs case isn’t as active as other funds. The reason?
The fund manager won’t have to modify the portfolio of Nifty BeEs unless there’s a change in Nifty 50. In fact, Nifty BeES can be classified as a passive fund that is designed to be low effort and economical.
That’s why Nifty BeES’ expense ratio is one of the lowest in India. The expense ratio can drop below 0.80% in case the Assets Under Management (AUM) rise above Rs. 500 crores (check the table for the latest expense ratio).
Not to forget, the returns generated by Nifty BeES is more or less in line with Nifty 50’s returns. At the same time, Nifty BeES gives you access to as many as 50 stocks, all for the price of one.
Investors can thus grow with the market and access diversification in a cost-effective manner. This concept as a whole has been made famous by legendary investors like Warren Buffet.
|AUM||Rs. 8,707 Crores|
|Returns Since Launch||15.39%|
Benefits of Investing in Nifty BeES
Investing in any ETF carries basic benefits like low investment cost, rich diversification, and others. Nifty BeES also gives you access to these benefits along with others. Let’s look at each benefit of investing in Nifty BeES.
Picking individual stocks can be a difficult task. After all, there are 5000+ options on the Indian market. Nifty BeES solves this problem by helping investors access the 50 biggest stocks in India by market capitalization.
2. Low Investment Cost
A passive fund like Nifty BeES does not require much intervention from the fund management team as the ETF’s portfolio mirrors Nifty 50’s components (that rarely change). That’s why Nifty BeES has a low expense ratio.
|Current Expense Ratio of Nifty BeEs||0.05%|
3. Track Record
Nifty BeES was launched in 2002, which makes it the oldest ETF in India. The older an asset, the longer its track record. That’s precisely the case with Nifty BeES. Investors can turn to historical data that spans over two decades.
4. Lucrative Returns
Nifty BeES doesn’t just mirror Nifty 50’s components, it also mirrors the returns that the index generates. Basically, the returns are known to be on par with the market.
5. No Bias. Less Risk.
An ETF like Nifty BeES will not look to outperform the market. That’s why the fund managers do not make buy or sell judgments. They simply create a portfolio of stocks that mirrors Nifty 50. This is known to reduce risk.
How to Invest in Nifty BeES?
You’ll be able to invest in Nippon India ETF Nifty BeES through your trading account with a stockbroker. Since the ETF works just like stocks, it requires an interface for placing a buy or sell order on an exchange that’s achieved through your trading account.
Once the buy order is approved, the shares of Nifty BeES will be transferred to your Demat account where they’ll be safe and secure. Executing the buy or sell order for Nifty BeES may carry a charge based on the stockbroker.
For example, you can invest in Nifty BeES without any brokerage charges or extra fees on Dhan. Furthermore, Dhan also gives you access to rich features like daily, weekly, and monthly SIPs in ETFs like Nifty BeES.
Is Nifty BeES a Good Investment?
The goal of Nifty BeES is to allow investors to grow with the markets by reducing the risk and cost of investing in the stock market. At the same time, Nifty BeES is a market-linked investment that carries a certain degree of risk.
Investors must thus evaluate their risk profile before investing in any stock or ETF like Nifty BeES. That said, Nifty BeES is considered to be a legacy asset. Remember, 2002 was just a couple of years after the dot com bubble burst.
As a result, investors were on the fence about investing in the markets. But US ETFs had proven that the basket of securities concept works. They generated positive returns even during a bear market.
While India is still warming up to the idea of investing in markets, apps like Dhan are on a mission to improve the overall investment experience for Indians. Click on the button below to explore Nifty BeES on Dhan.
FAQs on Nifty BeES
Q. What is BeES in Nifty?
Nifty BeES is an index ETF that is designed to have similar stocks to Nifty 50. The returns that Nifty BeES generates is also more or less the same Nifty 50. By the way, Nifty BeES meaning is Nifty Benchmark Exchange-Traded Scheme!
Q. Can We Trade in Nifty BeES?
Yes, it is possible to trade Nifty BeES with a trading account and Demat account. To start investing in Nifty BeES, you can choose a stockbroker like Dhan.
Q. Who Owns Nifty BeES?
Back when it was launched in 2001, Nifty BeES was managed by Benchmark Asset Management. India’s oldest ETF Nifty BeES is now owned and operated by Nippon India.
Q. Which companies are in Nifty BeES?
The goal of Nifty BeEs is to mirror Nifty 50, meaning its composition is more or less the same as Nifty 50. This is a list of the top 10 companies in Nifty BeEs:
- Reliance Industries
- HDFC Bank
- Infosys Computers
- ICICI Bank
- Tata Consultancy Services
- Kotak Mahindra Bank
- Hindustan Unilever
- Axis Bank
Disclaimer: This blog is not to be construed as investment advice. Trading and investing in the securities market carries risk. Please do your own due diligence or consult a trained financial professional before investing.