Nifty Benchmark Exchange Traded Scheme (Nifty BeES) -- A Promising Investment Product

Abstract

Nifty BeES is the first Exchange Traded Funds in the Indian Capital Market and its daily returns are compared to benchmark returns. The Researcher found out that Nifty BeES basically overperformd their benchmark while they endorsed their investors with lesser risk than the standard deviation of the Nifty Index. Further, this paper analyses the relationship between portfolio returns and market returns by using Simple Regression Model. The Researcher discovered that returns of the Nifty BeES for price was not related to the index returns, but returns of the Nifty BeES for NAV was related to the index returns. This was due to the price of the Nifty BeES in the secondary market being based on supply and demand while NAV of the Nifty BeES was based on the underlying index. Finally, this paper examined the observed deviation between returns of the Nifty BeES and Nifty Index. Applying three methods, the Researcher concluded that the average tracking error fluctuates from approximately 0.59% to 0.907% for price and 0.049% to 0.549% for NAV. All the methods, which were used in this study for calculating tracking error, did not produce the same results. During the study period of 6 years, portfolio returns of the Nifty BeES beat the market returns and hence it can be considered as one of the investment products in the promising Indian capital market.

Keywords: Nifty, ETFs, BeES