Index ETF and low volume and high spread and future of Index Etf in india

Stocks
1

the whole question is only about index etf and that to top etf like sbi.
I selected some of the top index ETF(Exchange Traded Funds), namely based on AUM they are from SBI,Nippon,UTI.
I want to invest in this, but during the market hours, i noticed when i placed market order it is not excuted, then it is a kind of red flag to me becuase the liquididty is not there and volume is also low and spread is also high.
Insted of investing in Mutual fund ETF I just wanted to invest in Index ETF.

Now i was worried to invest in this becuase of liquidity and spread. i am kind of into passive investing because they are more safe whcih i feel(very very long term).

But after looking at volume and spread and liquidity i was sad.

Lets say what if i invest regurlaryl in etf and suddenly there will no one buy when i want to sell ? all my investment is gone right ?
Can anyone help me how to approach this problem.
what will be the future of etf and etc…, should i consider this or not ?

2

So far it has been my experience with the EBBETF25 as well. I have put a limit order and it never hit that day and the next day .

I see that BEeS are really popular and I see the limit order placed being delivered in no time. Other than this the rest of the ETFs are kinda illiquid (is this the right word ?) .

I am surprised many ETFs from the most popular fund houses do not trade so well and if I have to sell it I have to put at a price lower . I think this has to do with the buyers on the other side . I think holding them long enough to cut down the losses on selling side would be a good idea .

3

Are you referring to SBI ETF Nifty 50?

I am invested in this ETF and till date not faced any issue of MARKET ORDER not getting executed. I can agree on limit order, sometimes I initially place the order based on iNAV and it will not get executed which is acceptable.

The above condition could happen, but the chances are very rare. This is why investing in stocks and shares are riskier.

Investing in index mutual fund will also carry the same risk. Franklin Templeton as an example had suspended 6 debt funds during pandemic period due to redemption pressure. However, all of the investor got the money back later on. Motilal oswal’s Nasdaq 100 had some issues, regulatory in nature - do a search on this as well.

Yes, you need to worry a lot if you are planning to invest in non index ETFS where there are liquidity issues. Do read about investing in ETF from Varsity, you will get an idea of the real risk in ETF investing. Among the various ETFs, the least riskier is Index ETFs.

Also read about why it is better to always place limit order and not market order when you buy ETFs.

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4

I am trading in ETFs and didn’t faced this issue…Though I invest with 10k per lot …Not sure if this problem is for bigger investment …

5

ok… This is theoretical understanding …

  1. Every ETF house publishes iNAV. which is current fair value of underlaying asset of that ETF for that instance.
  2. One should place buy and sell order at iNAV
  3. The ETF house has appointed one authorized participant (AP). if there is difference in current value and iNAV, The AP’s mandate is to buy/sell shares in equivalent proportions to the index the ETF house is trying to mimic and give/sell those shares to the ETF firm there by creating/disposing ETFs on the fly as per need. This will ensure order placed at iNAV will get thru…

So if AP is active and one places order at iNAV, there should not be any issue.

Anyhow practically it makes sense to visit https://www.nseindia.com/market-data/exchange-traded-funds-etf. Sort all ETFs by volume and invest in max traded ETF of the category which you want to invest.

I mean if you want to trade in gold, there would be many ETFS which track gold. Select the gold ETF which has max volume and place order at iNAV mentioned by that ETF house.

6

Thanks all for the reponses
I read about etf in varsity an other articles before i asked here.

  1. I want to buy (not trading), it is like very long term maybe till i die.
  2. SETFNN50 (I was specifically talking about this)
    3.my biggest fear is as i am looking for long term investment and as i want to invest monthly. this is almost like a stock but it is index (so you need buyer when you want to sell). and this is not mutual fund you can’t just ask hey manager, i need money just give my money whatever is there to realize.
7

Oh… same here. My intention also hold till not only for me but for my next generation :slightly_smiling_face:
If you want to use ETF route follow following rule

Also

Check on ETF volume … this Next Nifty 50 ETF had very low volume on data published for 7th March. There are other NN50 ETFs which have 10 time more volume. If you are worried about liquidity track daily volume for a month or so and select which has highest volume.

Anyhow everyone has different perception about risk. Nobody is wrong.

Since this is long term investment and not trading ,and fear about liquidity risk, you may consider any Nifty Next 50 index mutual fund. Apart from Expense ratio, I do not forsee any other issue for long term investing in passive index Mutual fund.

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8

Read this article it says, even large mf could take 60 days to return money to investors…

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9

so , the “nifty mid select” index will fall on monday ?

10

Thanks for the article. but It is about MF, my case is only with ETF , is there any relation with MF if you are trying to suggest

11

The point I was trying to make was MF is also not without liquidity issues. If Large MF can give out such result, this will be higher in ETF, but this is part of the game when investing in equities. You need to do your research and invest in well known ETFs and you will just do fine. Look at all the parameters which Varsity says you need to check on when investing in ETFs

My personal opinion only.

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