What's the difference between Motilal Oswal NASDAQ100 ETF and MIRAE ASSET NYSE FANG+ ETF ?

[lekky]

As the question suggests, I see that one is still trading on the NSE/BSE, while the other is not...I don't understand the difference? Why does the new SEBI rule not apply to both of these? Does MONAS100 track the NASDAQ growth accurately? How exactly is the ETF price set during live trading hours since the US market has different timings?

A little confused about all this foreign investing, and just trying to learn.

 

[dannyboy237]

@lekky Which one isn't trading on nse/bse? As for the difference, Fang+ etf invests in around 10 tech companies like Facebook, Netflix, Amazon, Microsoft Tesla Nvidia and so on. While Nasdaq 100 tracks top 100 stocks, which also includes fhese FAANG companies.

 

[lekky]

@dannyboy237 So as far as I can tell Fang+ didn't trade today?

Since you seem to be knowledgeable about this maybe you can help me understand...I have afew questions:

• Why does the new SEBI rule not apply to both of these?
• Does MONAS100/MASPTOP50 track the NASDAQ/S&P500 growth accurately?
• How exactly is the ETF price set during live trading hours since the US market has different timings?
• Is liquidity an issue for ETFs - if I need funds urgently is it guaranteed that I find a buyer?
• How will the SEBI rules affect investing in the mentioned ETFs?

 

[peyneust]

@lekky 1) The SEBI rule is for MUTUAL FUNDS to stop investing in FOREIGN ETFs. These are not MFs, they are bona fide ETFs. Or IETFs, whatever you want to call it.
2) look for the "tracking error" % for each and that'll tell you
3) The live price is set because the buyers and sellers of the ETF are Indian/ trade during Indian trade hours. Just like a stock like SBIN or DLF the price is dictated by supply and demand.
4) no if you want to liquidate the fund house has to pay you. Account for 3-5 working days to process in the worse case.
5) Only mutual funds have stopped investing in foreign ETFs. Bona fide overseas ETFs will still work as regular. Both ETFs you've mentioned are bona fide overseas index tracking funds. Anyway the entire industry is lobbying for the RBI to raise their 1 Billion $ and 7 billion $ overseas ETF and overseas investment cap anyway so shouldn't be an issue for much longer.

 

[lekky]

@peyneust Thanks a lot for your response. This clears up most of my queries. Just couple of small follow-ups:

• If the ETF price is dictated by supply and demand like a regular stock, then how does it track the index accurately (minus the tracking error)? I am probably missing something obvious, but then doesn’t the price fluctuate quite differently to how the price is changing on the corresponding US index?
• How does the fund house guarantee liquidation in practice? So let’s say I buy 1000 shares of the ETF in Zerodha, and I want to liquidate this after some time… is it sufficient if I place a sell order on the market place? Do I need to contact the fund house separately? How does this work in practice?
• What’s the difference between a bona fide overseas ETF vs foreign ETFs covered by the SEBI ruling? Why can’t the mutual funds get the same benefits by investing in these bona fide overseas ETFs?

Thanks for your time and patience, once again!

 

[transformed89]

@lekky For

1. Read about authorized participants , https://www.indiainfoline.com/knowledge-center/online-share-trading/who-are-authorized-participants they are responsible for acticing as buyer / seller and ensure the price does go high or low

• Placing order must be sufficient

 

[budsmama]

@lekky To answer your point 1 you can read the link below how ETF arbitrage works through creation of baskets.

https://www.investopedia.com/articles/investing/032615/how-etf-arbitrage-works.asp

 

[psaltichrysostom]

@peyneust

Anyway the entire industry is lobbying for the RBI to raise their 1 Billion $ and 7 billion $ overseas ETF and overseas investment cap anyway so shouldn't be an issue for much longer.

I was told by a quite senior fellow in an AMC that govt. is really not keen on increasing the limit till india's capital situation gets better. The AMC isnt expecting any change in situation for next 2-3 years. If the Balances improve and rupee gets stable they may increase the limit, but over longer term they want indian capital to stay invested in indian markets.

 

[peyneust]

@psaltichrysostom That would make more sense. The "lobbying" is probably to appease the outraged ETF investors on the part of the AMCs. Your contact is probably right, given the make-in-India push that's coming (again). Probably we'll see a raised limit 2 years before the next election.

 

[zashmaster]

@peyneust The distinction that you make between ETFs and mutual funds is not correct. Please see if you can correct it.

There are different caps for schemes investing in foreign equity vs foreign ETFs. Motilal Oswal buys equities, while most other AMCs - etfs of fund of funds - buy foreign ETFs. That is the reason why one is active while the other is not.

 

[peyneust]

@zashmaster Srinivesh is correct, I was explaining the base concept behind the new April 1 rule.

 

[lekky]

@zashmaster Sorry could you elaborate on this a bit? Since MO buys equities directly they are not covered by the cap?
Are the Mirae Asset ones (SP500 and Fang) etfs of FoF?

 

[logant2222]

@lekky So what options are left now to invest in international funds? I am able to find only below ETFs in India. Am I looking right way?

https://www.valueresearchonline.com/funds/41876/mirae-asset-hang-seng-tech-etf/#fund-portfolio

https://www.valueresearchonline.com/funds/41429/mirae-asset-nyse-fang-etf/#fund-portfolio

https://www.valueresearchonline.com/funds/41698/mirae-asset-sp-500-top-50-etf/#fund-portfolio

https://www.valueresearchonline.com/funds/12498/motilal-oswal-nasdaq-100-etf/#fund-portfolio

https://www.valueresearchonline.com/funds/41923/motilal-oswal-nasdaq-q50-etf/#fund-portfolio

https://www.valueresearchonline.com/funds/10905/nippon-india-etf-hang-seng-bees/#fund-portfolio

 

[marodi]

@logant2222 yes, no other options available.

MON100 is currently the most liquid with massive volume and best return to risk ratio imo

 

[paints]

@lekky Let me break down the differences between Mirae Asset NYSE FANG+ ETF and Motilal Oswal NASDAQ 100 FoF for you!

First off, if you're thinking about Mirae Asset NYSE FANG+ ETF, you're basically looking at an investment strategy that zeroes in on the NYSE FANG+ Index. This index is made up of 10 big tech companies like Facebook, Amazon, Netflix, and Google, with each holding an equal share. Now, if you're considering the Motilal Oswal NASDAQ 100 FoF, you'll be tracking the NASDAQ 100 index, which includes a whopping 100 large companies listed on the NASDAQ Stock Exchange, giving you a mix of well-established players and newer ones in the tech scene.

When it comes to spreading your investment risks, Mirae Asset NYSE FANG+ ETF is more about focusing on those big tech names, while Motilal Oswal NASDAQ 100 FoF gives you a wider range of companies beyond just the FANG+ stocks, which could potentially lower your risk as an investor.

It's worth noting that Motilal Oswal NASDAQ 100 FoF is available for trading on the NSE/BSE, whereas Mirae Asset NYSE FANG+ ETF isn't listed on these exchanges. Also, there's a new rule from SEBI that affects all mutual funds and ETFs dealing with foreign securities, but its impact might differ for each ETF due to their different setups and indices.

Both ETFs aim to closely track their respective indices, but there might be slight variations due to things like tracking errors, currency fluctuations, and liquidity. As you keep an eye on how they're doing, remember that during Indian trading hours, the ETF price on local exchanges is determined by supply and demand. And even though the US market operates on different hours, the ETF price adjusts based on how the index is performing during our trading hours.

If you're thinking about investing in international ETFs, keep in mind the risks like currency fluctuations and market ups and downs. Take your time to understand each ETF's features and think about what you want to achieve with your investment before making any decisions. Hope this clears things up for you!