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Forum Views - May 2024

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FORUM VIEWS - MAY 2024

can buy and sell liquid ETFs both from the market as well as

the issuing Mutual Fund.

• Saves effort: Investors no longer need to make

unnecessary transactions or move money between the

trading account and the bank account. Liquid ETFs also

help avoid the need to go through the trouble of waiting for

cheques to clear, or making electronic transfers to a trading

account.

4. Can Liquid ETF be used for the stock margin

requirements? What percentage of Liquid ETF can be used

as margin money?

5. What are the things one should be careful about when

investing in Liquid ETF for any Investor?

6. How many Liquid ETFs are there presently and what is

the total size of the Industry?

Yes, Liquid ETF can be used for stock margin, this instrument is

approved by stock excahnges to be used as stock margin.

Approximately 90% of the amount can be used as margin

money.

Ans-Investors needs to be careful about, these things when

buying Liquid ETFs.

• Brokerage charges: Investors may have to pay brokerage

while purchasing liquid ETF units, and brokerage charges

vary from broker to broker. Most brokers may not charge

any brokerage on the purchase of these products thereby

increasing their appeal for investors. It is advisable for

investors to confirm the brokerage amounts that they will

be charged on trades in liquid ETF before making a

purchase. Besides, not only are liquid ETFs convenient to

purchase and hold, it is much quicker than moving money

between your bank and the broker.

• Fractional units: Liquid ETFs give returns in terms of

increase in units, which can add small fractions to existing

holdings; fractional units cannot be sold on the Exchanges.

However, the issuing mutual fund (MF) house purchases

back the fractional units

• As Liquid ETF fall under the category of Specified Mutual

Funds (Whose exposure to domestic equity shares is less

than 35%), any investment made after April 01,2023 will be

deemed as short term asset and will be taxable as per

income slabs applicable to investor.

The Liquid ETF is in the early stage as a product. Presently there

are around 10 liquid ETFs. The total size is approximately

18000cr. But with strong increase in the demat accounts as

being seen and more investors adding up to equity investing,

the product has a very strong future prospect.

• Can be used for margin: While buying or selling stocks, it

takes 3 days to complete a trade. To avoid the

inconvenience of issuing cheques or making electronic

transactions each time, some traders keep some margin

with their brokers. However, this margin (money) does not

earn any returns. You could purchase liquid ETF units worth

the margin you want to maintain and earn returns till the

time it is used to purchase stocks.

• Flexibility: Investors can use liquid ETFs for various

purposes, including as a parking place for idle cash, an

alternative to savings accounts, or as a short-term

investment option.

Liquid ETFs are suitable for both retail traders and investors. It

is being used by Portfolio Management Services (PMS)

providers, Futures & Options (F&O) brokers and institutions

which invest directly in equities. These funds are also suited to

the needs of High Net Worth Individuals (HNIs) as many times,

these investors may have funds lying idle either in a trading

account or they may be maintaining margin money with their

brokers on which no returns are earned. By parking funds in

liquid ETFs, investors can earn returns on idle funds while also

remaining liquid to benefit from attractive investment

opportunities. Liquid ETFs can help make trading more

profitable if used in the right manner. And that too, in a much

easier and convenient way!

3. Who should be using these Investment instrument? Is it

focussed for any specific investor segment(stock traders)

and why?

The Liquid ETF is in the early stage as a

product. Presently there are around 10

liquid ETFs. The total size is

approximately 18000cr. But with strong

increase in the demat accounts as being

seen and more investors adding up to

equity investing, the product has a very

strong future prospect.

With over 25 years of exemplary experience in the Mutual Funds industry, Saket

is a seasoned professional with a proven track record of building successful

organizations from the ground up. As a visionary Co-Founder of ETF Junction

since January 2022, he has led the establishment of a thriving platform,

revolutionizing the investment landscape for ETFs.

His journey began in 1997 at Kothari AMC, India’s first private sector mutual

fund, where he played a pivotal role in establishing the Mutual Fund business in

the Eastern part of India. Subsequently, as Zonal Manager for Franklin Templeton

and Zonal Head for Bharati Axa Investment Managers, he showcased

exceptional leadership in driving growth and fostering client-centricity.

In 2013, he founded Rastey Commuting Services, transforming it into a

prominent player in transportation across India over nine successful years. The

company was awarded at the BID convention awards in Paris in 2019,

recognized as the best in quality service among car rental services in India.

Saket completed his management education at IIM Kolkata in 2000. His

extensive expertise lies in navigating the complexities of the Mutual Funds

domain and orchestrating organizational expansion. With an unwavering focus

on innovation and excellence, he is committed to making a significant impact on

the Mutual Funds industry.

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