The average quarterly AUM of gold ETFs has dipped from Rs 9,099 crore in the fourth quarter of fiscal 2014 to Rs 6,997 crore in the corresponding quarter of last fiscal.
Equity-based exchange-traded funds (ETFs) have seen a big surge in the first year of Narendra Modi's government with the assets under management (AUM) growing more than four-fold, from Rs 964 crore in the fourth quarter ended March 2014 to Rs 4,210 crore in January-March 2015.
However, gold ETFs – units that represent physical gold and aim to track the gold price – seem to have lost their glitter as the prices of yellow metal dipped in the international market over last one year. The average quarterly AUM of gold ETFs has dipped from Rs 9,099 crore in the fourth quarter of fiscal 2014 to Rs 6,997 crore in the corresponding quarter of last fiscal.
Close to 85% of the ETFs are traded on India's premier bourse National Stock Exchange (NSE). Ravi Varanasi, chief, business development - NSE, told dna, "Globally, ETF is a very popular product. Going forward, many more ETFs are expected on the NSE platform."
"Many institutional investors participated heavily in banking ETF during last financial year while participation by both institutional investors and high net worth individuals (HNIs) was pretty high in Nifty ETF in comparison with the previous year. The bull phase has definitely added more sentiments towards equity investments, including equity-based ETFs," says Binson Mathew, a financial consultant attached to Tabeel Consultants.
The action is likely to get intensified once a part of Employees' Provident Fund Organisation (EPFO) corpus gets invested in equities through ETFs. The labour ministry recently allowed for 5-15% of the total corpus to be invested in equity ETFs.
In the ETFs market, half of the ETFs are equity-linked, while the rest are mostly gold price-linked, along with a couple of debt-oriented ones. There are around 28 equity ETFs, with a collective assets under management (AUM) of Rs 6,624 crore, including the ETF of central public sector enterprises (CPSE), run by Goldman Sachs Asset Management (India). The CPSE ETF consists of shares of ten big public sector units such as ONGC, Gail, Coal India, Indian Oil, Oil India and Power Finance Corporation.
ETFs are insignificant when compared to mutual funds industry and account for just about 1.21% of the total AUM of Rs 11,86,364 crore in the MF industry as on April 30,2015.
Mutual funds are bought and sold directly from the mutual fund company at the current day's closing price (the Net Asset Value or NAV calculated for the fund at the end of the day), while ETFs are traded throughout the day at the current market price, like a stock, and may cost more or less than NAV.
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