Examining ways to enhance liquidity in Indian ETF market, says Sebi chief

MUMBAI: The Securities and Exchange Board of India is examining ways in which liquidity in the exchange-traded funds segment on the stock exchanges can be improved, head of the capital market regulator Ajay Tyagi said today.

Speaking at a virtual event, Tyagi also highlighted that the market regulator is making efforts to improve feasibility of introducing new exchange-traded funds such as corporate bond ETFs to increase liquidity in the corporate bond market.

The Sebi head acknowledged that ETFs are steadily attracting new investors because of their low total expense ratio as compared to active management fees. The share of ETF assets under management in total AuM of mutual funds in India has risen from merely 2 per cent in 2015-16 to 9 per cent in 2020-21, Tyagi said.

Despite the rising interest in ETF products in India, the market continues to be dogged by liquidity challenges. ETF are a passive investment tool wherein, the fund mirrors the benchmark it tracks and aims to provide similar returns as the benchmark.

ETF products are tradable in the secondary market, however, in India price distortions in the buying and selling of ETFs is common due to low liquidity and presence of only a handful of market makers.


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