Marking a turning point in the history of Indian securities markets, the new fund offer (NFO) by Benchmark Mutual Fund allows Indians to invest in an international index.
Through Hang Seng BeES, the open-ended exchange listed index scheme to be listed on National Stock Exchange (NSE), investors can now trade in Hong Kong’s Hang Seng Index.
Hang Seng BeES, an exchange traded fund (ETF), would track the performance of Hang Seng Index, which comprises 42 companies including HSBC Holdings, China Mobile, Bank of China, Cathay Pacific Airways and China Construction Bank Corporation.
“This is a product available to (an) investor at his doorstep and gives an opportunity to invest and gain from prosperity in Chinese market,” said NSE MD and CEO Ravi Narain.
The NFO opened for subscription on February 15 and will close on February 24. The scheme would open for trade on NSE around March 26. The minimum application amount is Rs 10,000.
One drawback for Indian investors, however, is the absence of tax benefits. But there is no securities transaction tax levy on it, said an official of Benchmark Mutual Fund.
“For a while now, we were sensing that (the) Indian investor is ready for international exposure. With this pioneering effort of Benchmark, I dare say that many more international products would be traded in India. ETFs are gaining traction,”said Narain.
However, trading in a foreign index poses certain risks to the investor: he would be exposed to currency fluctuation and tracking error as the two exchanges have only 2.30 hours of overlapping period.
“The currency risk would be transferred to the investor and the tracking error is kept to the minimum. But it is best to invest by 1.30 pm, the overlapping period of the two exchanges,” a Benchmark official said.