Exchange traded funds are baskets of securities that are traded, like individual stocks, on an exchange. Unlike regular open-end mutual funds, exchange traded funds can be bought and sold like any stock throughout the trading day.
iShares BSE Sensex India Tracker, the exchange traded fund in the Sensex created by Barclays Global Investors, the global leader in exchange traded funds, was listed in the Hong Kong Stock Exchange on Thursday, enabling investors in Hong Kong to take exposure in the booming Indian stock market.
This is the first time that Indian equity index, particularly the BSE Sensex-based instrument, will be traded in a foreign stock exchange. If this instrument clicks, the next destination for the Sensex will be the US stock exchanges, according to observer.
The Sensex is already registered as a patent under the US patent regime, and the Commodity Futures Trading Commission has given its approval to the Sensex for derivative trading. This shows foreign institutional investors' interest in the Sensex.
This is the second instance of an India-specific stock index getting listed outside India. Earlier in June, iShares MSCI, an exchange traded fund based on Morgan Stanley Capital International's India index, also created by Barclays Global Investors, was listed on the Singapore Exchange.
At present, there are about 600 exchange traded funds listed and traded across the world, with assets under management of above $487 billion.
