Stock / Share Market
by 5paisa Research Team Last Updated: 2022-11-28T13:21:33+05:30

Introduction

If you are a stock market investor, you must know what NIFTY BeES is. It is an exchange-traded fund that was launched in December 2001. The ETF replicates the entire S&P CNX NIFTY Index. The fund is listed on the National Stock Exchange. Hence, you can place your trades and buy or sell them in the share market.

Exchange-traded funds have recently gained much popularity in the stock market, and the NIFTY BeES has contributed to their popularity. Several investors consider the NIFTY BeES a great investment as it helps them diversify their portfolios. 
 

How do NIFTY BeES Work?

Now that you know what NIFTY BeES is, you must try to understand how the investment instrument works. The investors earn dividends on the amount they invest in NIFTY BeES based on the market moments. However, the distribution of the dividends solely depends on the surplus funds available with the company for dividend distribution.

The NIFTY BeES tracks the NIFTY 50 index. This means that the NIFTY BeEs replicate the investment pattern of the NIFTY 50 and invest in those companies that are a part of the NIFTY 50. While there is no assurance that the security will move as per the NIFTY 50 account, there is a huge possibility that it might mirror the movements of the index. You must know how to trade in NIFTY BeES if you want to keep a tab on the NIFTY 50 index.


The fund invests in 50 different companies. Hence, it earns its returns from its holdings in different companies. If you buy 1 unit of NIFTY BeES, you can enjoy the benefits of investing in 50 companies at once. Once the fund earns its returns, the scheme's trustee decides on the portion of the returns that should be paid out as dividends.

The NIFTY BeES is very transparent, as you know about the 50 companies you will invest in through these funds. The fund is listed on the National Stock Exchange and works as a regular equity instrument. You need to visit the market and place a trade. These funds are highly liquid and provide a cushion to people looking for long-term benefits. If you are wondering how to invest in NIFTY BeES, you must visit a stock trading platform and place your trade.

If you are wondering how to purchase NIFTY BeES, you need to use your trading app to place the trade and pay for the instrument's value. As the NIFTY BeES works as other shares, you can buy them in a dematerialised form. Therefore, they are traded on the NSE and follow a T+1 rolling settlement where the funds will reflect in your trading account a day after you place the trade. If you are confused about how to start SIP in Nifty BeES, you can use the trading portal to make the investments.
 

Benefits of Investing in NIFTY BeES in India

Now that you know how to purchase NIFTY BeES, you must also realise the benefits that it brings to the table. There are several benefits of investing in NIFTY BeES. You must analyse these benefits and understand how to buy NIFTY BeES. Some of these benefits include:

● Simple to Manage

The NIFTY BeES are quite simple to manage. These funds are also economical as you get exposure to 50 companies by investing a nominal amount. Placing a trade for NIFTY BeES is quite easy to trade in equities on the stock market. You can visit the NSE terminal and check the current prices of the NIFTY BeES.
Post that, you can either buy or sell the NIFTY BeES. The fund replicates the S&P CNX NIFTY. Also, the management expenses of the fund do not exceed 0.8%. Hence the entire investment does not come with several finance costs.

 ● Provides Flexibility

The NIFTY BeES is highly liquid. Hence, it is quite convenient for investors to manage these funds. The investor can quickly buy or sell these funds based on the price changes in the market. The fund is listed on the National Stock Exchange, so you can only invest in them during trading hours. Investors can place limit orders at any time during these trading orders.
You can hold these funds with your equity-linked instruments in a Demat account. These funds are highly liquid, and you can easily convert them into cash whenever you need them. These funds are highly flexible.

● Transparency

You must know what is NIFTY BeES if you are planning on making an investment or tracking the NIFTY 50 index. Investing in a NIFTY BsES is a great choice. These funds are highly transparent. The fund manager manages these funds without any biases. Also, these funds are a replica of the S&P CNX NIFTY Index, and hence, it mirrors the fund's performance. Therefore, the skillset or the knowledge of the fund manager has no impact on the fund's performance.
Also, you can check the holdings of the fund and any price changes at any given time.

● Diversifies the Portfolio

If you are looking for portfolio diversification, you must invest in these funds. When you invest in these mutual funds, you get exposure to 50 companies at once through the investment.
Hence, the risks that come with the fund are mitigated, and you add an element of diversification to your portfolio. Also, you can exchange the fund with a pre-defined portfolio. Also, It facilitates short-term trading for people who generally make long-term investments. 
 

How to Invest in NIFTY BeES?

It is quite easy to invest in a NIFTY BeES. You can invest in them both online and offline. Let's have a look at both modes of investment:

● Online Trading

You can use a trading platform to invest in NIFTY BsES. The process is known as online trading when you use an online portal to make any investment. You can use this portal to keep a tab on your investments.
The platform also allows you to make decisions in real time. For instance, if there is a price fluctuation, you can decide to sell off the fund. Online trading platforms allow you to make investment decisions without the help of a broker. 

● Offline Trading

If you want to invest in these funds offline, you can reach out to your stockbroker and ask him to place the trade. You need to dial their number, and they will make the transaction on your behalf.
However, unlike online trading, the investor will not be able to keep a tab on their investments. Also, you will not have the freedom to buy and sell the investments as and when you like, as you will not be able to monitor the fund's performance actively.
 

Is NIFTY BeES a Good Investment?

NIFTY BeES is a good investment as it provides much-needed diversification to your portfolio. As the fund earns its returns by investing in 50 companies, you get exposure to these 50 companies spread across sectors. Even with one unit of NIFTY BsES, you add the element of diversification to your portfolio.
Another reason for choosing NIFTY BeES as an investment as the fund is quite cost-effective. The fund's expense ratio is 0.8%, which is better than the expense ratio of the other funds in the category. The fund replicates the S&P CNX NIFTY. Hence, you will have proper know-how of how the investment works. These funds safeguard long-term investors from all kinds of externalities. Hence, it can be considered a good investment.
 

Do NIFTY BeES Give Dividends?

The dividend distribution from NIFTY BeES profits highly depends on the free money they have available for distributing dividends. The person managing the fund decides if they should distribute the funds. If yes, they will also decide the amount that must be paid as dividends.
However, all these dividends are subject to TDS, so you will have to pay taxes on your dividend income. As soon as the fund declares the dividend, it will make the payments to the investors within the next 30 days.
 

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Frequently Asked Questions

A unit of NIFTY BsES is about 1/10th of the S&P CNX NIFTY Index Value. You can buy any unit depending on your budget and the kind of returns you want from the fund.

Selling shares not one's own, such as those borrowed from a brokerage, is known as short selling. ETFs are eligible for short selling; however, short selling is not permitted for NIFTY BsES.

The ideal trade approach is investing in NIFTY derivatives based on your investment goals. However, this is more of a short-term plan. This is because there is a three-month limit on the longest you can invest in a derivative contract.
 
 

ETFs have a far reduced expense ratio and are exchanged like shares on the stock market. The primary distinction is that while NIFTY BeES exclusively mimics the S&P CNX NIFTY funds, ETFs can be of stock, gold, debt, or currency.