ETFs in India: How Exchange-Traded Funds Work on NSE and BSE

ETFs in India are closely related to index funds. The key difference is how they are traded. A mutual fund index fund is priced once per day (NAV); an ETF can be bought and sold throughout the trading day at live market prices through your demat account on Zerodha, Groww, or any SEBI-registered broker.

Popular Indian ETFs include Nippon India Nifty BeES (tracks Nifty 50, one of the most liquid), SBI Gold ETF (tracks gold prices), CPSE ETF (tracks government companies), and Bharat Bond ETF (tracks AAA-rated PSU bonds). The Nifty 50 ETFs have expense ratios as low as 0.04-0.05% — among the cheapest investment products available in India.

Why are ETFs becoming popular in India? Three reasons: ultra-low cost, simplicity, and real-time pricing. A single Nifty BeES purchase gives you exposure to 50 of India's largest companies. Gold ETFs eliminate the problems of physical gold (purity concerns, storage, making charges).

However, ETFs in India have a practical limitation compared to mutual funds: you cannot set up a true automated SIP. Each purchase must be made manually through your trading app during market hours. This makes mutual fund index funds more convenient for disciplined SIP investors, while ETFs suit lump-sum investors or active traders.

The main risk is the same as any market-linked investment. If the Nifty 50 drops 20%, your Nifty ETF drops 20% with it. This is expected and normal — but requires a long-term mindset and the discipline to stay invested through corrections.