​ALL ABOUT IT ETF

The COVID – 19 pandemic has got us to look at digitisation in a whole new way. With online meetings, there is an increased dependence on technology. Virtual meet-ups and video conferences have become a way of life for us. We are adapting to newer platforms of technologies like never before on a personal level too. The new normal of life includes virtual house parties, digital video conversations, and live movie streaming with online companionship. The buzz around Artificial Intelligence (AI), Cloud Computing, Virtual/Artificial Reality, 5G networks, and Cybersecurity has gathered renewed momentum. All this has increased the demand for digital services and the Information Technology (IT) sector in general.

What is an IT ETF?

An IT Exchange Traded Fund or IT ETF has features similar to investing in both direct shares on the exchange as well as making investments in any other open-ended Mutual Fund from the IT sector. Being ETFs, these are listed on the stock exchanges and can be transacted during the market trading hours. IT ETF tracks benchmark index that measures the performance of the Information Technology Sector Index, subject to tracking errors.

Why now?

Now maybe a good time to invest in IT ETFs –

The COVID-19 pandemic has accentuated the shift toward the online and digital way of working for companies and individuals. So, companies and Governments are expected to increase budgets on IT and digital services to expand their footprint.

Most of the IT services and products companies have MNC clients based in the USA and Europe. Because of the export of IT services, the revenues earned are in USD and Euro, while most of the costs are incurred domestically in India. So, IT companies make higher profits, generally on account of depreciation of Indian

Relatively Unaffected delivery models The Information Technology Service Delivery models are relatively less impacted during Covid-19 pandemic. In fact, this is one sector for which the pandemic has proved to be a blessing in disguise. Most IT companies were able to successfully transition their employees to a WFH (Work from Home) environment while offering seamless and uninterrupted services to their clients.

The companies were able to save on travel, administration, & other operating costs while keeping the delivery of services to clients intact. With the growing use of online meetings, online banking, and essentials getting delivered via digital platforms; the IT companies have played a vital role in changing the way how things used to be before COVID 19. Thus, this helped showcase a great potential for business growth and better margins.

Benefits of Investing in IT ETFs:

1. Own Top IT stocks: This ETF provides exposure (based on Benchmark Index Methodology and Free-Float market capitalisation) to top IT stocks in the market – You no longer need to worry about owning individual stocks. These Funds invest in the entire basket of IT stocks forming part of the underlying index.

2. Avoid stock-picking risk: Also known as non – systemic risks, it means a risk that is associated only to a particular company. Investors are generally advised to stay protected against non-systemic risk. Investors may be able to mitigate this risk from the active stock picking and fund manager selection by investing in ETF.

3. Trade in Real-Time Basis: It provides you with the flexibility to trade in Real-Time Basis - As it is an ETF listed on the stock exchange, it can easily be traded just like any other stock. This provides you with the flexibility to enter and exit at any time during trading hours

4. Low-Cost Investment – As ETF does not involve any research expenses, ETF products are generally available at a lower cost than most of the other open-ended mutual funds.