{"id":15639,"date":"2025-11-18T15:49:40","date_gmt":"2025-11-18T10:19:40","guid":{"rendered":"https:\/\/www.gwcindia.in\/blog\/?p=15639"},"modified":"2025-11-18T15:49:40","modified_gmt":"2025-11-18T10:19:40","slug":"rise-of-smart-beta-etfs-in-india","status":"publish","type":"post","link":"https:\/\/www.gwcindia.in\/blog\/rise-of-smart-beta-etfs-in-india\/","title":{"rendered":"Rise of Smart Beta ETFs in India"},"content":{"rendered":"
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Rise of Smart Beta ETFs in India<\/strong><\/h1>\n

Exchange-Traded Funds (ETFs)<\/a> have grown rapidly in India over the past decade, driven by rising investor awareness, lower costs, and strong interest from both retail and institutional participants. Among the various categories of ETFs, Smart Beta ETFs<\/strong> have gained significant traction in recent years as investors look for strategies that combine the best of passive and active investing.<\/p>\n

Smart Beta ETFs follow a rules-based approach that goes beyond traditional market-cap weighting. They offer exposure to factors such as value, momentum, low volatility, quality, or dividends\u2014factors that have historically delivered higher risk-adjusted returns. As the Indian market matures, Smart Beta ETFs are emerging as an attractive tool for building diversified, cost-efficient, and performance-oriented portfolios.<\/p>\n

This article breaks down how Smart Beta ETFs work, why they\u2019re gaining popularity in India, and what investors should consider before adding them to their portfolios.<\/p>\n

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What Are Smart Beta ETFs?<\/strong><\/h2>\n

Traditional ETFs track broad market indices like Nifty 50 or Sensex using market-cap weighting<\/strong>\u2014larger companies have higher weight.<\/p>\n

Smart Beta ETFs, however, use alternative rule-based weighting methodologies<\/strong>. They aim to capture specific investment factors that academic research has shown to outperform the market over long periods.<\/p>\n

Common Factors Tracked by Smart Beta ETFs<\/strong><\/h3>\n
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  1. \n

    Value<\/strong> \u2013 invests in undervalued stocks based on metrics like P\/E, P\/B, or cash flow.<\/p>\n<\/li>\n

  2. \n

    Quality<\/strong> \u2013 focuses on financially strong companies with stable earnings, low debt, and high ROE.<\/p>\n<\/li>\n

  3. \n

    Momentum<\/strong> \u2013 selects stocks that have shown strong recent price performance.<\/p>\n<\/li>\n

  4. \n

    Low Volatility<\/strong> \u2013 targets stocks with historically lower price fluctuations.<\/p>\n<\/li>\n

  5. \n

    Dividend Yield<\/strong> \u2013 invests in companies with high and consistent dividend payouts.<\/p>\n<\/li>\n

  6. \n

    Multi-Factor<\/strong> \u2013 combines two or more factors for broader risk-adjusted returns.<\/p>\n<\/li>\n<\/ol>\n

    Each ETF leverages a rules-based methodology<\/strong>, reducing fund manager discretion while still introducing targeted exposure beyond simple market-cap indices.<\/p>\n

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    Why Are Smart Beta ETFs Gaining Popularity in India?<\/strong><\/h2>\n

    1. Investors Want Better Risk-Adjusted Returns<\/strong><\/h3>\n

    Smart Beta strategies aim to outperform traditional indices over the long term by capturing factor-based premiums.
    For example:<\/p>\n