Zerodha Fund House (ZFH) has successfully listed its Nifty 1D Rate Liquid ETF on the National Stock Exchange (NSE). The newly launched Exchange-Traded Fund (ETF) replicates the Nifty 1D Rate Index, providing investors with an opportunity to tap into the returns generated by market participants in the overnight lending market, the fund house said.
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This new product from ZFH marks the arrival of liquid ETFs that offer a growth net asset value (NAV) for the first time in India.
About the fund and index
The ETF primarily invests in TREPS (Treasury Bills Repurchase) traded on the CCIL (Clearing Corporation of India Ltd) platform.
The Nifty 1D Rate Index has been developed to measure the returns generated by market participants lending in the overnight market.
The index uses the overnight rate provided through the Tri-Party Repo Dealing System (TREPS) for the computation of index values.
Asset allocation
| Types of Instruments | Minimum Allocation (% of Total Assets) | Maximum Allocation (% of Total Assets) | Risk Profile |
|---|---|---|---|
| Tri-Party Repo on Government Securities or T-bills, Reverse Repo & Cash and Cash equivalents | 95% | 100% | Low |
| G-sec(s) and/or T-bills with a residual maturity of up to 30 days | 0% | 5% | Low |
(Source: Fund document)
Should one invest?
As the investment is made in short-term debt products backed by treasury bills, it carries a relatively low credit risk and low interest rate risk, the fund house said.
The fund may facilitate a seamless transition between equity and cash within the same settlement, thereby facilitating better cash management and hence suitable for all types of investors, it said.
According to Vishal Jain, CEO of Zerodha Fund House, the new feature makes it easier to track the ETF's performance.
Additionally, the returns are taxed only when the ETF is sold, offering a tax advantage compared to daily dividends, which are taxed continuously.
However, as with any investment, individuals should carefully consider their financial goals, risk tolerance, and investment horizon before making a decision.
First Published: Jan 24, 2024 3:58 PM IST
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