What is Nifty BeES ETF? Features, Benefits & How to Invest?

Do you want to invest in stocks but need help choosing which ones to include? Selecting stocks can be a risky gamble. However, there’s an option that lets you invest in the top 50 companies simultaneously in India. This is possible through the Nifty BeES exchange-traded fund (ETF).

This blog will discuss the advantages of investing in the Nifty BeES fund and how it operates.

Understanding Nifty BeES ETF Meaning

Nippon India Nifty BeES ETF, more commonly known as just Nifty BeES ETF, was launched in 2001 with the objective of following the Nifty 50 Index. Its name was chosen so that Nifty stood for the index it monitors, and BeES stood for the abbreviation of the Benchmark Exchange-Traded Scheme. 

Features of Nifty BeES

1. Like any other ETF, this is the most straightforward type of investment vehicle that allows for easy trading and investment. 
2. Returns are aligned with the Nifty 50 index, thus allowing investors to earn a return similar to the top 50 stocks of the exchange.
3. Nifty BeES has a lower expense ratio than actively managed mutual funds.
4.   The invested capital stays spread throughout 50 large-cap firms, reducing risk through diversification.

Advantages of Nifty BeES

1. The ETF has high liquidity, thus allowing you to quickly liquidate your money whenever you want. 
2. Given the extremely low expense ratios, they are typically considered cost-effective investment options. 
3. The fund allows the investors to gain exposure to India’s top 50 large-cap firms by investing in Nifty BeES. 
4. Unlike other investment options, investing in Nifty BeES gives transparency because the investor already knows where their money will go.
5. During market hours, investors can buy and sell the units in real time. 

Read Also: What are ETFs? Are ETFs good for beginner investors?

How Does Nifty BeEs Work?

The Nifty BeES are funds that are managed passively. The money is invested in stocks that are part of the Nifty 50 index, and the fund aims to produce returns comparable to the index. However, it is important to know that though they invest in the Nifty 50 index, there is no assurance or guarantee that the fund will achieve its goal completely due to the presence of tracking errors.  

How to Invest in Nifty BeES?

Investors can invest in Nifty BeES like other stocks through a trading and demat account. It has an ISIN (International Securities Identification Number) assigned to it. Unlike mutual funds, which can be traded only at the end of the day, the Nifty BeES ETF is listed on the National Stock Exchange. An investor can buy and sell the units of the Nifty BeES ETF at any time during market hours. The dynamics of supply and demand determine the price of Nifty BeES. 

You can hold these securities in your demat account. Investors and authorized participants can participate through units. The minimum denomination of units that can be purchased or redeemed from the AMC is 50,000 units. Investors can buy as little as one unit at a time and at the prevailing market price.

Taxation of Nifty BeES

The tax treatment of the Nifty BeES is the same as that of any other stock index fund, as they are treated like equity mutual funds. The Nifty BeES units are subject to a 15% tax on profit (Short-Term Capital Gains) if sold within a year and a 10% tax on profit (Long-Term Capital Gains) if sold after a year and with more than one lakh in profit. 

Who Should Invest in Nifty BeES?

If you are new to investing and lack sufficient understanding of the range of investment items on the market, you should consider investing in the Nifty BeES. The fund is known to provide the benefit of diversification as it spreads your capital among the top 50 companies listed on the exchange. 

Additionally, an investor may want to think about this alternative if they want to invest in the equities market and are willing to pay a minor charge in expense ratios. Overall, it’s a good option for those investors who wish to gain exposure to the Nifty 50 index without going through the hassle of manually picking stocks. 

Nifty BeES Performance

Scheme Name	1 Week	1 Month	3 Months	6 Months	1 Year	3 Years	5 Years
Nippon India Nifty 50 BeES ETF	1.89	1.63	2.14	14.26	24.89	15.95	15.79
Nifty 50 TRI	2.06	2.5	2.31	14.47	25.48	15.59	15.93

From the return table above, the fund has provided a slightly lower return than the Nifty 50 Index. This is probably due to the presence of tracking errors. 

Read Also: What is Nifty BeES ETF?

Conclusion

Nifty BeES is an exchange-traded fund that invests in the top 50 Indian firms. It provides investors with the benefits of diversification while providing a hassle-free solution to the problem of manually picking stocks. The fund is also known to provide immense liquidity, thus making it more beneficial for investors to choose. Those looking to begin their investment path may find Nifty BeES to be a suitable solution. 

However, equity markets have drawbacks, such as high volatility and no guaranteed return. Therefore, it’s important to analyze all the pros and cons before investing thoroughly. 

Frequently Asked Questions (FAQs)