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Nifty 50 BeES, designed to track Nifty 50, is India’s first ETF and is traded like stock on NSE and BSE. It offers diversified and low-cost exposure to India’s Top 50 companies.
What is Nifty 50 BeES?
Nifty 50 BeES (Benchmark Exchange Traded Scheme) is India’s first exchange-traded fund, designed to track and replicate the performance of the Nifty 50 Index. The index is a list of the top 50 companies listed on the National Stock Exchange (NSE).
Here’s how you can better understand the meaning of Nifty 50 BeES: Each unit represents a small portion of the Nifty 50 index, allowing you to gain better investment access to India’s leading companies without buying individual shares. You can also buy as few as 1 unit, and that 1 unit represents all 50 companies that make up the Nifty 50 index. In other words, by investing in Nifty 50 BeES, you are indirectly investing in the top 50 companies of India across sectors like banking, IT, energy, FMCG, and more.
This Exchange Traded Fund (ETF) is traded on the NSE and BSE just like regular shares, which means you can buy or sell it during market hours in real time. The price of Nifty 50 BeES fluctuates throughout the day based on market demand and supply, like any other listed stock. Additionally, the price of Nifty 50 BeES is kept close to its actual Net Asset Value (NAV) by authorized participants (APs) and arbitrageurs who step in to buy or sell if the price deviates too much. This helps ensure the fund effectively tracks the performance of the underlying index.
Features of Nifty 50 BeES
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Nifty 50 BeES, India’s inaugural exchange-traded fund, debuted on December 28, 2001, and is currently managed by Nippon India Mutual Fund.
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Nifty 50 BeES units represent 1/100th of the Nifty 50 Index and 1/10th of the S&P CNX Nifty index.
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Real-time Net Asset Value (NAV) data for Nifty 50 BeES is calculated based on trades on the NSE.
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Nifty 50 BeES units are traded in a dematerialised form on the stock exchange, allowing investors to buy or sell at any time.
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Simultaneous trading is an option for investors.
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The minimum investment amount for Nifty 50 BeES is set at ₹10,000, making it accessible to a diverse range of investors.
How Do Nifty 50 BeES Work?
Nifty 50 BeES operates as an ETF designed to replicate the movements of the Nifty 50 index. In simple terms, it invests in the same companies as the Nifty 50 index covers, aiming to deliver investment returns that closely mirror the total gains of these index-linked securities, before accounting for expenses. The method it employs is a passive investment strategy, involving the acquisition of the constituent stocks comprising the Nifty 50 index. This ensures that Nifty 50 BeES closely reflects the composition of the index, maintaining the same proportions for each stock (except for a minor portion reserved for liquidity purposes).Now that you have a grasp of what is Nifty 50 BeES and its functioning, the next step is understanding how to invest in this innovative investment option.
How to Invest in Nifty 50 BeES
Investing in Nifty 50 BeES is simple and similar to buying stocks. Here’s how you can do it:
Open a trading and demat account
To invest in Nifty 50 BeES, you need an active trading account and a demat account. You can open these easily through platforms like Angel One, which offers free demat account opening.
Search for Nifty 50 BeES on NSE or BSE
Nifty 50 BeES are available on both stock exchanges. Look for the Nifty 50 BeES symbol on your trading platform.
Place a buy order
Decide the number of units you want to buy and place your order during market hours. You can also use limit orders to control your buying price.
Monitor your investment
After purchase, Nifty 50 BeES units will appear in your demat account. You can track their value just like any stock and sell them anytime you wish.
Difference Between Nifty 50 BeES and Mutual Funds
Here is a quick look at how Nifty 50 BeES is different from mutual funds:
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Feature |
Nifty 50 BeES (ETF) |
Mutual Fund |
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Management Type |
Passively managed (tracks the Nifty 50 index) |
Actively or passively managed |
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Trading |
Traded in real time on NSE and BSE |
Bought or sold multiple times, but unit allocation will be calculated on the day’s closing NAV |
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Expense Ratio |
Lower (cost-effective) |
Higher (management fees apply) |
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Liquidity |
High – can be purchased or sold anytime |
Lower – depends on the fund redemption process |
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Minimum Investment |
Small amount possible |
Usually ₹500 or more per SIP |
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Transparency |
High – portfolio disclosed daily |
Limited – portfolio disclosed monthly or quarterly |
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Price Mechanism |
Determined by market demand/supply throughout the day |
Calculated NAV, applied once per day, after market closing |
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Investment |
Can be traded intraday or margin |
Only for long-term investment, no margin trading |
Is Nifty 50 BeES a Good Investment?
Nifty 50 BeES presents a cost-effective and diversified investment opportunity, mirroring the Nifty 50 index and granting exposure to India’s top 50 companies. Its stock exchange trading capability enhances liquidity and transparency while also offering tax efficiency and investment flexibility. However, potential risks such as liquidity, tracking error, and market fluctuations should be considered by investors, along with a comparison of the expense ratio against similar investment alternatives.
Advantages of Nifty 50 BeES
Nifty 50 BeES stands out with the following advantages, positioning it as an attractive choice for potential investors seeking an appealing investment avenue.
Ease of fund management
Nifty 50 BeES operates with a straightforwardness that characterises typical ETF funds. Investors can seamlessly invest and trade through their Demat and trading accounts. By closely tracking its underlying Index, the fund aims to align its performance with minimal deviations.
Seamless trading experience
Nifty 50 BeES works like any other stock, which makes trading seamless and easier. You can buy and sell units instantly through your trading account during market hours, and you can use advanced orders like limit orders to control your exact purchase or sale price. This also helps you strategise better to minimise your losses.
Favourable cost structure
Nifty 50 BeES maintains a notably lower expense ratio compared to many other investment products, including mutual funds. In fact, this fund has no exit load, which is generally applicable in various mutual funds.
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Enhanced liquidity [H3]
Nifty 50 BeES trades similarly to individual stocks, giving it a distinctive liquidity advantage. Authorised Participants (APs), who use the underlying Nifty 50 shares to generate new ETF units or redeem existing ones, also help maintain liquidity.
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Commitment to transparency [H3]
Nifty 50 BeES gives investors access to precise information about the fund’s holdings across every security. This provides a comprehensive and transparent view.
Disadvantages of Nifty 50 BeES
While Nifty 50 BeES offers a range of benefits, it’s important to consider its potential disadvantages before making an investment decision. Here are some of the drawbacks associated with investing in Nifty 50 BeES:
Moderate returns
One notable disadvantage of Nifty 50 BeES lies in its potential for providing comparatively lower returns when compared to certain mutual funds. This is because Nifty 50 BeES is designed to mirror the movement of a specific index, which may limit its growth potential compared to actively managed funds.
Excessive diversification
While diversification is generally a prudent strategy, there’s a risk of excessive diversification with Nifty 50 BeES. This can result in diluted returns and may create confusion for investors who might find it challenging to comprehend the vast range of companies encompassed by the index.
Taxation of Nifty 50 BeES
The taxation of Nifty 50 BeES closely resembles that of index funds. Here’s an overview of how Nifty 50 BeES is taxed:
Short-term capital gains
If you make gains from Nifty 50 BeES investments within a holding period of less than one year, these gains are subject to a tax rate of 20%. This aligns with the taxation rate for short-term capital gains on equity investments.
Long-term capital gains
Should you choose to hold your Nifty 50 BeES investments for an extended period, exceeding one year, the resulting earnings are taxed at 12.5%. Notably, this rate applies without the added benefit of indexation.
Conclusion
Nifty 50 BeES offers a simple gateway into the stock market with easy trading, affordability, and advantages like speedy transactions and liquidity. However, keep in mind that it might not yield extremely high returns and could be overly diversified. Nevertheless, as a wise step into investing, it’s worth considering.If you’re ready to explore this avenue, consider opening a demat account with Angel One for free and embark on your investment journey today.