THE INDIAN ETF MARKET: FROM INCEPTION TO INNOVATION

Binu C Kurian

doi:10.29121/shodhkosh.v3.i2.2022.3364

Authors

Binu C Kurian Associate Professor of Commerce, Govt. Victoria College Palakkad

DOI:

https://doi.org/10.29121/shodhkosh.v3.i2.2022.3364

Keywords:

Exchange-Traded Funds (ETFs), Market Dynamics, Passive Investing, Indian Market

Abstract [English]

Exchange-Traded Funds (ETFs) have emerged as a vital component of global financial markets, offering investors diversification, liquidity, and cost efficiency. In India, while ETFs have grown steadily since their introduction in 2002, they remain a smaller segment of the mutual fund industry compared to global standards. This study explores the growth, challenges, and opportunities in India’s ETF market, focusing on regulatory milestones, market trends, and comparisons with international markets. It highlights key barriers, including limited retail awareness, low product diversity, and liquidity issues, alongside opportunities from rising digital adoption, investor interest, and regulatory reforms. By analyzing data from industry reports and academic studies, the paper provides actionable insights for policymakers, asset managers, and investors. The findings emphasize the need for innovation, enhanced investor education, and supportive regulation to unlock the full potential of ETFs in India and drive their future growth.

References

Aggarwal, R., & Schofield, L. (2014). The growth of global ETFs and regulatory challenges. Advances in Financial Economics, 16, 1–34. https://doi.org/10.1108/S1569-373220140000016003

Chandrasekaran, S., Kumar, A., & Sharma, P. (2020). The evolution of ETFs: Trends, challenges, and growth potential in India. Journal of Financial Markets in Emerging Economies, 12(3), 87–105.

da Costa Neto, A., da Silva, M. F., & Ramos, M. L. (2019). Behavioral patterns in ETF adoption: Evidence from emerging markets. Global Finance Journal, 41, 212–223.

Jayanthi, M., & Srinivasan, R. (2013). Gold ETFs: A hedge against uncertainty for Indian investors. Indian Journal of Finance, 7(5), 19–25.

Kumar, P. (2020). The rise of passive investing in India: Drivers and barriers. Asia-Pacific Journal of Investment Research, 8(4), 67–82.

Madhavan, A. (2014). ETFs: The challenges of liquidity and tracking error. Financial Analysts Journal, 70(1), 20–35. https://doi.org/10.2469/faj.v70.n1.3 DOI: https://doi.org/10.2469/faj.v70.n1.3

Narend, K., Sharma, V., & Gupta, A. (2019). Liquidity dynamics in the Indian ETF market. Emerging Markets Finance and Trade, 55(12), 2807–2822. https://doi.org/10.1080/1540496X.2019.1624390

Prasanna, K. (2012). Barriers to the growth of ETFs in India. Journal of Indian Financial Studies, 6(2), 45–59.

Tarassov, M. (2016). ETFs and the rise of passive investment strategies: A global perspective. Journal of Portfolio Management, 42(4), 56–68.

Polisetty, A., & Manda, V. K. (2019). Growth and development of exchange-traded funds (ETFs) in India. Advance and Innovative Research.

Prasanna, P. K. (2012). Performance of exchange-traded funds in India. International Journal of Business and Management. DOI: https://doi.org/10.5539/ijbm.v7n23p122

Khan, A. P., Bacha, O. I., & Masih, A. M. (2015). Performance and trading characteristics of exchange-traded funds: Developed vs emerging markets. Capital Markets Review.

Muhamat, A. A., Omar, M. F., & Yahya, N. C. (2020). Global Exchange-Traded Funds (ETFs): Emerging market potentials. Empirical Economics Letters.

Kumar, D. B. (2016). Exchange traded fund in India: Performance analysis with mutual fund and global perspectives. International Journal of Marketing & Financial.

Mittal, S. K. (2017). Exchange-traded fund: A historical review. Asian Journal of Management. DOI: https://doi.org/10.5958/2321-5763.2017.00053.1

Nargunam, R., & Anuradha, N. (2017). Market efficiency of gold exchange-traded funds in India. Financial Innovation. DOI: https://doi.org/10.1186/s40854-017-0064-y

Blitz, D., & Huij, J. (2012). Evaluating the performance of global emerging markets equity exchange-traded funds. Emerging Markets Review, 13(2), 213–227. https://doi.org/10.1016/j.ememar.2012.01.001 DOI: https://doi.org/10.1016/j.ememar.2012.01.004

Omondi, O. (2014). ETFs growth prospects: A review of global trading in year 2013. DOI: https://doi.org/10.2139/ssrn.2426116

Marszk, A., & Lechman, E. (2019). Exchange-traded funds: Concepts and contexts. In The Emergence of ETFs. Springer. DOI: https://doi.org/10.1007/978-3-030-12752-7_2

Tarassov, E. (2016). Exchange-traded funds (ETF): History, mechanism, academic literature review, and research perspectives. Корпоративные финансы. DOI: https://doi.org/10.17323/j.jcfr.2073-0438.10.2.2016.89-108

Krishnamurti, C., & Vishwanath, S. R. (2009). An overview of mutual funds and exchange-traded funds. In A Modern Guide to Security Analysis. Springer. DOI: https://doi.org/10.1007/978-3-540-88802-4_23

Abner, D. J. (2016). The ETF handbook: How to value and trade exchange-traded funds. Wiley. DOI: https://doi.org/10.1002/9781119297727

Hawaldar, I. T., Bai, V., & Suhan, M. (2020). Are global exchange-traded funds pretentious on exchange rate fluctuation? A study using the GARCH model. SSRN.

Singh, J., & Kaur, P. (2016). Tracking efficiency of exchange-traded funds (ETFs): Empirical evidence from Indian equity ETFs. Paradigm, 20(2), 125–138. https://doi.org/10.1177/0971890716670722 DOI: https://doi.org/10.1177/0971890716670722

Nandal, S., & Kumar, A. (2020). Risk and return dynamics of ETF and index funds: A review of existing literature. Turkish Online Journal of Qualitative Inquiry.