Investors looking to invest in equity-based stocks often face dilemma of identifying the correct stock which would give better returns and perform well during the volatile times.
State Bank of India (SBI) has launched its SBI-ETF Quality, an exchange-traded fund which will invest in Nifty200 Quality 30. It will invest in the top 30 companies from its parent Nifty200 index based on their ‘quality scores.’ The scheme is opened till December 3.
The quality score for each company will be determined based on three factors – profitability, leverage and earnings growth variability, the bank said.
According to Investopedia, an ETF, or exchange-traded fund, is a marketable security that tracks a stock index, a commodity, bonds, or a basket of assets. Although similar in many ways, ETFs differ from mutual funds because of shares trade like a common stock on an exchange.
The price of an ETF’s shares will change throughout the day as they are bought and sold. The largest ETFs typically have higher average daily volume and lower fees than mutual fund shares which makes them an attractive alternative for individual investors.
“The investment objective of the scheme is to provide returns that closely correspond to the total returns of the securities as represented by the underlying index, subject to tracking error. However, there is no guarantee or assurance that the investment objective of the scheme will be achieved,” SBI said.
The bank has also set the guidelines for investing in the SBI-ETF Quality scheme which will allow an investor to apply with Rs 5,000 and in multiples of Re 1 thereof during the new fund offer (NFO) period.
After the NFO period, authorised participants and large investors can directly purchase or redeem in blocks from the fund in 'Creation Unit' size (12,000 units and in multiples thereof) on any business day who are directly handling the fund. Whereas on the exchange, the units of the scheme can be purchased or redeemed in a minimum lot of 1 unit and in multiples thereof.
The applicant under the scheme will be required to have a beneficiary account with depository participant of National Securities Depository Limited (NSDL) or Central Depository Services Limited (CDSL) and will be required to indicate in the application the depository participants (DP's) name, ID number and the beneficiary account number of the applicant with the DP.
SBI said the units of the scheme will be available in dematerialised or electronic form only. It will be issued, traded and settled compulsorily in dematerialised form, the bank said, adding that applications without relevant details will be liable to be rejected.