Index ETFs fail to track indices as market makers stay away
- Market makers faced liquidity troubles in their other positions in a volatile market
- Market makers (usually brokers) are entities that buy and sell ETF units, making money by charging a small spread between their buy and sell prices
Mumbai: As the Nifty crumbled by 7.61% on 16th March, Exchange Traded Funds (ETFs) tracking it failed to keep up. Nippon India ETF Nifty BEES, one of the largest and oldest ETFs tracking the Index fell by just 2.23%. SBI ETF Nifty 50, which has assets under management of ₹64,464 crore, and is India’s largest equity mutual fund scheme, closed up instead of down. It closed with a gain of 1.16%. The tracking failure was not just limited to the Nifty. SBI Sensex ETF was down 3.61% even as the Sensex itself fell by 7.96%. Intra-day moves in the ETFs tracking India’s benchmark indices were also wildly out of sync with the underlying indices. This may have hurt retail investors trying to take advantage of the market correction.
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