Today I have noticed one thing the most popular etf price changes are not aligned with Index change . Am I missing anything . When the tracking error is negligible in ETF why they are not mimicking corresponding Index
Sample data Here
Nifty 50 Today change - 5 to 7 Percent down
But Niftybees only down 2.9 Percent
I am not able to understand why it is not mimicking the index performance .
( Nifty BeES, or Nifty Benchmark Exchange Traded Scheme, is an ETF that attempts to replicate the NSE Nifty 50 Index’s performance)
Is this happen due to the Market makers are not active or some thing else ?
Each AMC will publish inav eod, that is the constituent value. What trades on the market with premium/discount is purely market forces.
It could be due to large influx of GTT triggers etc because everyone (buyers today) are not fully aware. Ppl would have just bought assuming its trading at fair value. Its a bit like absurd prices in illiquid scrips.
Often seen huge premiums/discount in nifty/bn current month futures on large gap days as well.
not about eod/15min etc, in volatilty the timing may not match but the point is its still market forces. If there is no buyer, it will be in lower circuit if sellers are desperate and so on. simple
Simple reason, there are too many buyers compared to sellers, and buyers are willing to buy at premium to actual value (and hence ETFs are trading at premium to INAV)
Typically in normal market conditions, market makers jump in to capture this difference and control deviations to INAV.
But in market like yesterday, with extreme volatility, market makers are unable to cover up (or unwilling to) and hence the gap. Market making also involves risks, and in extreme volatility, market makers go slow, to avoid unnecessary high risks.
If there are many buyers compared to sellers, how did the price go down, shouldn’t it go up. And if there are many buyers (of niftybees etc), they the same buyers are indirectly buying nifty 50 index, so shouldn’t index price be aligned with etf price (as same buying and selling is happening in both) ?
Today, the NIFTY Index changed by X% (up/down). Similarly, the NIFTY ETF price moved by Y% (up/down), closely tracking the index. These changes reflect current market conditions and broader economic trends. For more details, keep an eye on market news and updates.
Hi @Chirag1 ,
Thank You for the reply.
I don’t have much lengthy experience to Bank nifty etf , What I concern is the Liquidity issue . Like You said.
When there is 7 Percent Faill in the Nifty bank and 20 Perc Lower circuit in the Etf will be a great problem .
Reason is Most of the time , Hedging will be done via a Short call or Long Put option . I think the gain we get from the option will be much lower than the Loss will in-cure in Etf Lower circuit …
Do we have a better Hedging option . If there is a scope for Daily or Weekly or Monthly revenue will be surplus advantage along with etf price surge (bull ) . Other viable addons for range bound market . Low cost hedging for bear market .
Currently I am doing this (I am a civil Engineer ,I don’t have continuous time to monitor the setup - But we can discuss general setup then tweak for professionals )
*I have Near about no of bank nifty Etf matching 0ne slot Bank Nifty option - Brought in the recent fall
Hedging done via One Long Put
Currently the Etf is making profit and put is in loss ( This is a perfect +ve scenario )
Are there any better Ideas than this ?
Update :
ETF sold in the recent hike . The Long Put also cleared at a reasonable price Yesterday .
All ETFs, whether it is Nippon nifty bees or bank bees, do not entirely mimic the index is because of the percentage/weightage alloted to each of the holdings. For eg. Adani ports was highly volatile during the said period but it’s weightage is 0.98% in Nippon nifty bees.
The idea of the ETF by these fund houses is to follow index but their volatility is not the same because of the associated weightage for each holding
Long Term Put like Dec expiry need lot of money , Swing or positional traders really need these type of hedge or do we have any better way of doing it ?
Hi @Aayush_Anurag Thank You for the reply .
ETF are mimicking index , so weightage of each stock will be same as per the Index weightage ? Or Am I Missing anything ?
NiftyBees Inav page is Crisp and updated regularly(Auto). SBI is also Auto updated one .
If we can regularly Monitor we can Buy at Inav but selling may be a problem …
