INTRODUCTION
Exchange trading funds are just what their name implies- basket of securities that are traded, like individual stock on the exchange. Unlike regular open-ended mutual funds ETF can be bought and sold throughout the trading day like stock. Most ETF charge lower annual expense than index mutual funds. However, as with stocks, one must pay a brokerage to buy and sell ETF units which can be significant drawback for that trade frequently or invest regular, some of money. Their passive nature is a necessity; the funds rely on arbitrage mechanism to keep the prices at which they trade roughly in line with the net asset values of their underlying portfolios. Global assets under management held by exchange traded funds (ETFs), one of the growing areas of world equity markets, soared by over 46% in 2004 compared with 2003. The funds asset increased by 51% in USA, 66% in Europe and nearly 10% in Japan. ETFs which are listed and traded like equities, track indexes of stocks, bonds or other assets without requiring the investors to buy all the index components. An exchange-traded funds, or ETF, are a type of Investment Company whose investment objective is to achieve the same return as a particular market index. An ETF is similar to an index fund in that it will primarily invest in the securities of companies that are included in a selected market index. An ETF will incest in either all of the securities or a representative sample of the securities included in the index. For example one type of ETF, know as Spiders or SPDRs, invest in all of the stock contained in the S&P 500 composite Stock Price Index.
STATEMENT OF THE PROBLEM The study was performed mainly to assess the performance of Exchange Traded Funds in India.
OBJECTIVES PRIMARY OBJECTIVE The primary objective of the study is to assess the performance of Exchange Traded Funds in India SECONDARY OBJECTIVES To analyze the performance of ETFs and its benchmark with respect to NAV of the fund and the index value. To find out the weekly returns of the fund and then analyzing it with the returns of the underlying index To find out the tracking error of Exchange Traded Funds, so as verify the funds performance to its underlying index. SCOPE OF THE STUDY This study focused on the performance evaluation of Exchange Traded Funds. In this present Scenario, this will definitely help the investors to find out where his funds stand in its performance. Also it will help the investor to understand the various factors he should consider for the performance evaluation of his fund .
RESEARCH METHODOLOGY Researchers in common refer to a search for knowledge .One can also define research as a scientific and systematic search for pertinent information on a specific topic. In fact, research is an art of scientific investigation.' Rodman and Moray' define
research as a "Systematized effort to gain new knowledge" .Here we using the fundamental analysis as research methodology. RESEARCH DESIGN A Research Design is the arrangement conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. The Research Design used for the study is analytical in nature. METHOD OF DATA COLLECTION In this study, the method used is secondary data. Secondary data means data already available i.e. they referred to data which have already been collected and analyzed. The data is collected from various websites and published books. The analysis was done on the basis of NAVs and Benchmark Index. The NAVs of the selected ETFs are collected from AMFI India. The Benchmark Index is collected from sites of different stock exchanges. The ETFs selected with their corresponding benchmark index are: 1. Nifty Bees 2. Junior Nifty Bees 3. Bank Bees 4. UTI Sunder 5. ICICI Spice PERIOD OF THE STUDY Dec 17 2007 to March 17, 2008 TOOLS USED FOR THE STUDY
The study was conducted to analyze the performance, return and tracking error of ETFs.
RETURN ANALYSIS Percentage change in NAV = NAV (t)-NAV (t-1)/ NAV (t-1) * 100 Where NAV (t) = NAV as on Date, NAV (t-1) = Entry Value
TRACKING ERROR ANALYSIS Tracking error is the difference between returns from the Index to that of the Index. Annualized Tracking Error = S.D of the differences between weekly returns of the funds And the index * square root of no. of weeks LIMITATIONS OF THE STUDY 1. The data for the study were mostly collected from the websites. There were no many books for references. 2. Since ETF being new concept non- availability of expert guidance and literature was one of the serious difficulties faced during the conduct of the study. This may likely to affect the quality of the project.
3. The performance of ETFs is affected by several factors like economic, social, political, financial etc. but in this study only the financial factors have been considered. 4. The data analyzed was for only five months so the performance was not analyzed annually.
5. The time duration of the study was too short.
