Widely read:
A new exchange-traded fund (ETF) has been introduced by SBI Mutual Fund to track the Nifty 1D Rate Index. The SBI Nifty 1D Rate ETF marks the fund house's second ETF in the debt space, following the SBI Nifty 10-Year Benchmark G-Sec ETF.
About SBI Nifty 1D Rate ETF
NFO snapshot
| Fund name | SBI Nifty 1D Rate ETF |
| SEBI category | Exchange-traded fund (ETF) |
| NFO period | October 23 to October 26, 2023 |
| Investment objective | To generate returns that before expenses closely correspond to the returns of the Nifty 1D Rate Index, subject to tracking error. |
| Minimum investment size (During NFO) | Rs 5,000 |
| Benchmark | Nifty 1D Rate Index |
| Fund manager | Tejas Soman |
| Exit load | Nil |
The SBI Nifty 1D Rate ETF will track the Nifty 1D rate index and invest in instruments called Tri-Party Repos in Government Securities (TREPS). TREPS is a way for investors to safely borrow and lend money for a short term against government securities so they can make some profit on their extra cash.
The new fund offer (NFO) is open for subscription until October 26, 2023, following which it will be available for trading on the stock exchanges.
Other funds tracking the index
Notably, there are already five other funds that track the Nifty 1D Rate Index. These funds are as follows:
-
Nippon India ETF Nifty 1D Rate Liquid BeES
-
DSP NIFTY 1D Rate Liquid ETF
-
HDFC NIFTY 1D RATE LIQUID ETF
-
Kotak Nifty 1D Rate Liquid ETF
- Mirae Asset Nifty 1D Rate Liquid ETF
Funds tracking the Nifty 1D Rate Index
| Funds | Launch date | 1M return (%) |
|---|---|---|
| Nippon India ETF Nifty 1D Rate Liquid BeES | July 2003 | 0.47 |
| DSP NIFTY 1D Rate Liquid ETF | March 2018 | 0.54 |
| HDFC NIFTY 1D RATE LIQUID ETF | August 2023 | 0.1 |
| Kotak Nifty 1D Rate Liquid ETF | January 2023 | 0.54 |
| Mirae Asset Nifty 1D Rate Liquid ETF | July 2023 | 0.56 |
Among these, Nippon India ETF Nifty 1D Rate Liquid BeES is the longest-established and exhibited the highest daily trading volume of Rs 1,895 crore on October 20, 2023, on both the NSE and BSE exchanges. DSP NIFTY 1D Rate Liquid ETF recorded a trading volume of Rs 262 crore. The remaining three funds are relatively new to the market.
Who should invest in such ETFs?
The
ETFs
that track the Nifty 1D Rate Index primarily cater to active traders seeking to generate additional returns on their idle funds in their trading accounts. When you find yourself with surplus cash not earmarked for immediate use, allocating it to short-term investments like these ETFs can yield modest returns, certainly better than leaving your cash idle. Additionally, since these funds are listed on the stock exchange, you have the flexibility to sell them should an appealing investment opportunity arise.
To conclude, it is worthwhile mentioning that there has been a surge in AMCs (asset management companies) introducing ETFs within this category. To provide context, prior to 2019, only two ETFs of this nature were available. However, in 2023 alone, three new ETFs have been launched, with SBI now unveiling its fourth such ETF.
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