SBI Nifty 50 ETF, one of the most popular investment options in the Indian mutual fund space, has garnered significant attention by crossing Rs. 2 lakh crore in assets under management (AUM). This milestone shows the high level of trust investors place in the fund. The scheme, which invests in the top 50 companies in India, has consistently provided impressive returns, making it an attractive option for both experienced and new investors.
Let’s take a closer look at the reasons behind the success of this ETF and why investors continue to flock towards it.
What is SBI Nifty 50 ETF?
SBI Nifty 50 ETF is an open-ended exchange-traded fund (ETF) that closely follows the Nifty 50 Total Return Index (Nifty 50 TRI). The fund was launched in July 2015 and has been a favorite among investors looking for a reliable, long-term growth option. By passively tracking the Nifty 50 index, the scheme offers exposure to India’s 50 largest and most trusted companies.
The fund’s low expense ratio and consistent performance have been major contributors to its popularity. As of September 30, 2024, its AUM stood at an impressive Rs. 2.12 lakh crore.
Strong Historical Returns
One of the key reasons why investors are drawn to the SBI Nifty 50 ETF is its track record of solid returns. Since its inception, the scheme has provided investors with consistent gains, outperforming many other investment options.
Here’s a breakdown of the returns based on compounded annual growth rate (CAGR):
- Since inception (9 years): 13.93%
- 5-year returns: 18.79%
- 3-year returns: 14.84%
- 1-year returns: 32.66%
For those who made lump-sum investments, Rs. 1 lakh invested nine years ago has now grown to approximately Rs. 3.31 lakh. The fund has also shown strong growth over shorter periods, with the same Rs. 1 lakh growing to Rs. 2.36 lakh in five years and Rs. 1.51 lakh in just three years.
SIP Returns Add Value
For investors preferring the Systematic Investment Plan (SIP) route, the SBI Nifty 50 ETF has also provided excellent returns. A monthly SIP of Rs. 5,000 over the last nine years, along with an initial lump sum investment of Rs. 1 lakh, would have resulted in a total investment of Rs. 6.4 lakh. Today, that investment would be worth nearly Rs. 14.98 lakh, reflecting the fund’s impressive performance over time.
Why Investors Trust SBI Nifty 50 ETF
The key reason behind the growing trust in SBI Nifty 50 ETF is its consistent performance and the security it offers by investing in large-cap, top-tier companies. Here are some other factors contributing to the scheme’s popularity:
- Diversified Portfolio: The fund’s investments span across various sectors, offering diversification that reduces risk while maximizing returns. As of now, the financial services sector holds the largest share (32.92%) of the total portfolio, followed by information technology (12.74%) and oil, gas, and consumable fuels (11.26%). This balanced sectoral allocation strengthens the fund’s ability to weather market fluctuations.
- Top Holdings in Reputed Companies: The ETF’s top 10 holdings include industry giants like HDFC Bank, Reliance Industries, ICICI Bank, and Infosys. These companies together make up over 54% of the fund’s total AUM. This heavy investment in trusted, well-established corporations offers a level of security and reliability that is highly valued by investors.
- Low Expense Ratio: The SBI Nifty 50 ETF charges a total expense ratio (TER) of just 0.04%, making it an incredibly cost-effective investment. This means that investors retain a greater portion of their returns, as the administrative and management fees are very minimal.
- Low Tracking Error: Despite being a passive fund, the SBI Nifty 50 ETF has managed to maintain a low tracking error, ensuring that the returns closely mirror the performance of the Nifty 50 index. Over the last year, the tracking error stood at just 0.0304%, while over three years, it was 0.0321%.
- No Exit Load: One of the fund’s appealing features is the absence of any exit load, allowing investors to redeem their units without incurring any extra charges. This makes it a flexible investment option for those who may need access to their funds at short notice.
Who Should Invest in SBI Nifty 50 ETF?
The SBI Nifty 50 ETF is ideal for investors who want to invest in equity markets without taking on too much risk. It provides exposure to the country’s top companies, ensuring that the portfolio is composed of trusted businesses. However, it’s important to note that the fund comes with a “very high” risk rating, meaning investors should be prepared for market volatility.
Long-term investors, especially those looking for wealth creation through SIPs or lump-sum investments, may find this ETF to be a solid option for steady returns. However, like all equity investments, it’s crucial to consider the associated risks and consult with a financial advisor before making any decisions.
