The Nifty Bees is an Exchange-Traded Fund (ETF) in India. If you are looking to diversify your portfolio beyond mutual funds and other traditional savings and investment instruments, you can consider investing in the Nifty Bees. However, before you do so, it is essential to understand what the Nifty Bees ETF is, how it functions, its potential benefits, and how it fits into your overall financial goals.
What is the Nifty Bees?
Launched in 2002, Nifty Bees, short for the Benchmark Exchange Traded Scheme, was India’s first ETF. ETFs are a basket of different securities, such as stocks, bonds, or commodities, that can be traded on the stock exchange, similar to individual stocks.
The Nifty Bees is designed to replicate the performance of the S&P CNX Nifty Index, now known as the NIFTY 50 Index, which includes the 50 most prominent and liquid stocks traded on the National Stock Exchange (NSE) of India. Each unit of the Nifty Bees is equivalent to 1/10th of the value of the Nifty 50 Index. The Nifty Bees has a competitive annual expense ratio, which includes management charges. For assets below Rs 5 billion, the expense ratio is 0.80% of the daily average net assets. If the assets exceed Rs 5 billion, the expense ratio is reduced to 0.65%.
Investing in Nifty Bees offers exposure to the top 50 stocks that make up the Nifty 50 Index. This can help you achieve diversification with a single investment.
How does the Nifty Bees really work?
The Nifty Bees ETF tracks and mirrors the performance of the Nifty 50 Index, which comprises the 50 leading companies listed on the NSE. It follows a passive investment strategy and aims to simply replicate the performance of the Nifty 50 by investing in the same securities as the index.
It is important to note that the Nifty Bees is an ETF, so when you invest in it, you do not directly buy shares of individual companies. Instead, you purchase units of the ETF, each of which represents a fraction of the underlying Nifty 50 Index. Like individual stocks, you can buy or sell these ETF units on the stock exchange during market hours.
You can invest in Nifty Bees through a trading and Demat account.
Advantages of Nifty Bees
- Higher liquidity: Nifty Bees offers high liquidity since it is traded on the stock exchange. You can use it to park excess funds and withdraw your investment in case of an emergency.
- Convenience: Investing in Nifty Bees is quite convenient. You can invest and trade through your existing Demat and trading account, just like buying or selling any other stock. Since it is listed on the stock exchange, you can buy and sell Nifty Bees units during market hours. Additionally, because Nifty Bees follows a passive investment strategy, you do not need to actively monitor your portfolio. The ETF automatically tracks the Nifty 50 Index.
- Diversification: Nifty Bees invests in the top 50 companies within the Nifty 50 Index. This allows you to have a diversified investment and mitigate risk.
How is the Nifty Bees taxed?
Nifty Bees is classified as an equity-oriented ETF because it invests in the Nifty 50 index, which primarily consists of stocks. When you sell your Nifty Bees units, the taxation depends on the holding period. If the units are held for more than 12 months, the sale will incur Long-Term Capital Gains (LTCG) tax at a rate of 12.5% for gains over Rs 1.25 lakh/year. If sold within 12 months, the gains will be considered Short-Term Capital Gains (STCG) and taxed at 20%.
Additionally, any dividend income received from Nifty Bees is taxable in the hands of the investor according to the income tax slab into which one falls.
Conclusion
The Nifty Bees ETF can be a good investment if you prefer high liquidity and passive management. You can trade it on the NSE during trading hours using a Demat account. Moreover, since it directly replicates the Nifty 50 Index, you can expect transparency too. It also offers diversification by providing exposure to 50 shares across multiple sectors.
An investor education initiative by Edelweiss Mutual Fund
All Mutual Fund Investors have to go through a one-time KYC process. Investors should deal only with Registered Mutual Fund (RMF). For more info on KYC, RMF and procedure to lodge/redress any
complaints, visit - https://www.edelweissmf.com/kyc-norms
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS. READ ALL SCHEME-RELATED DOCUMENTS CAREFULLY
Trending Articles
Signup for our Newsletter
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
