Zerodha Nifty 50 Index Fund and Zerodha Nifty 50 ETF

Modified on Tue, 23 Sep at 3:12 PM

What is the primary investment goal of the Zerodha Nifty 50 Index Fund and the Zerodha Nifty 50 ETF?

The primary investment objective for both the Zerodha Nifty 50 Index Fund and the Zerodha Nifty 50 ETF is identical: to provide returns that replicate to the performance of the Nifty 50 Total Returns Index, subject to tracking errors.

What type of funds are these?

Both funds are open-ended schemes designed to track the Nifty 50 Index, but both fall into slightly different regulatory sub-categories and are structured differently for investors.

The Zerodha Nifty 50 Index Fund is classified as an "Other Schemes - Index Fund".
The Zerodha Nifty 50 ETF is classified as an "Other Schemes - ETF (Exchange Traded Fund)".

What is the Nifty 50 Total Returns Index (TRI) that these funds track?

The benchmark for both the Zerodha Nifty 50 Index Fund and the Zerodha Nifty 50 ETF is the Nifty 50 Index (TRI).

The Nifty 50 is a flagship stock market index that represents the country’s top 50 blue-chip

companies across various sectors listed on the National Stock Exchange of India (NSE). These companies are selected from the broader Nifty 100 universe based on criteria like free-float market capitalization and trading liquidity. As such, the Nifty 50 is widely regarded as a barometer for the overall health and direction of the Indian stock market.

What is the fundamental difference between the Nifty 50 Index Fund and the Nifty 50 ETF?

The core difference lies in how you buy and sell units and how they are priced.

The Zerodha Nifty 50 Index Fund is a mutual fund scheme. Investors buy (subscribe) units, and sell (redeem) units. The transaction price for all investors on a given day is the same i.e., Net Asset Value (NAV) calculated at the close of the market for that day.

The Zerodha Nifty 50 ETF (Exchange Traded Fund), on the other hand, functions like a stock. Its units are listed and traded on the stock exchanges (NSE and BSE) throughout the trading day. Retail investors buy and sell ETF units from other investors in the market through a stockbroker. The price of an ETF unit is not the end-of-day NAV, but a live market price that fluctuates based on real-time supply and demand.

What were the New Fund Offer (NFO) open and close dates, and when will both the schemes re-open?

NFO Opening Date: 26 Sept
NFO Closing Date: 10 Oct
Allotment Date: 14 Oct
Scheme Re-opening Date: 17 Oct
Listing of the ETF: 20 Oct (Tentative)

What are the minimum investment amounts for each fund?

Zerodha Nifty 50 Index Fund:

During NFO: ₹100 and in multiples of ‘any amount’ thereafter
On a continuous basis : ₹100 and in multiples of ‘any amount’ thereafter.
Additional Purchase: During the ongoing offer period, for subsequent additional purchases, the investor can invest with the minimum amount of ₹100 and in multiples of ‘any amount’ thereafter

Zerodha Nifty 50 ETF:

During NFO: The minimum application was ₹1000, and in multiples of ₹1000 thereafter.
Ongoing (on the stock exchange): For retail investors, the minimum investment is 1 unit and in multiples thereof on the exchange(s) where the units are listed. .
Ongoing (directly with the fund): This is for Market Makers and Large Investors (transactions > ₹25 crores), who must transact in "Creation Units" of 200,000 ETF units.

Can I set up a Systematic Investment Plan (SIP)?

The availability of systematic investment facilities is another major point of difference.

Nifty 50 Index Fund: Yes. It offers a comprehensive suite of systematic facilities, including the Systematic Investment Plan (SIP), Systematic Transfer Plan (STP), and Systematic Withdrawal Plan (SWP).
Nifty 50 ETF: No. The fund itself does not offer a native SIP, STP, or SWP facility.

How are these funds taxed?

For detailed and personalized tax advice, investors should consult their financial advisor. However, a general overview of the taxation is as follows.

Both the Zerodha Nifty 50 Index Fund and the Zerodha Nifty 50 ETF are classified as equity-oriented mutual fund schemes for tax purposes.

Long-Term Capital Gains (LTCG): If you sell your units after holding them for more than 12 months, the gains are considered long-term and will be taxed at 12.5% (plus applicable surcharge & health and education cess).
Short-Term Capital Gains (STCG): If you sell your units within 12 months from the date of its purchase, the gains are considered short-term and will be taxed at 20% (plus applicable surcharge & health and education cess)