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Exchange-traded funds

Silver ETFs Trade at Substantial Discounts in India

Strategic Insights

— 1 min read

Retail investors in India who bought silver ETFs (exchange traded funds) last week, riding the wave of a buying frenzy due to a sudden shortage in the spot market, are now facing significant losses as the price of the white metal dips. The price of ETFs units on domestic bourses has started trading at substantial discounts to spot prices, with some ETFs available at discounts of around 10% from their net asset values. The correction in price of silver has led to a massive decline in the value of these ETFs, with some of the biggest ETFs in India down by as much as 21% from their all-time peaks.

Key Takeaways:

  • Silver BEES ETF, one of the biggest ETFs on silver in India, was down 2.3% at Rs 142 on Thursday and was down 21% from its all-time peak of Rs 180.
  • ICICI Prudential Silver ETF, another leading one, was down 1.6% on Thursday at Rs 149, a loss of 21% from its Oct 14 peak at Rs 188.
  • Usually, ETFs trade at very small discounts to their NAVs, mainly due to holding of some cash by fund managers and some other operational adjustments.
  • The recent move from premium to discounts was mainly because the earlier shortages in the spot market had almost ended, analysts said.
  • With optimism surrounding India-US and China-US trade deals, investors globally are also buying risky assets like stocks again and moving away from haven assets like bullion.
  • Rahul Kalantri of Mehta Equities noted that in the international markets, the prices of gold and silver stabilised around $4,050/ounce and $48/ounce after a sharp correction in the last two sessions as investors booked profits from Monday's record highs.

Statistics:

  • ETFs traded at savings of 1525% from their respective peaks.
  • Silver BEES ETF was down 2.3% at Rs 142 on Thursday.
  • ICICI Prudential Silver ETF was down 1.6% on Thursday at Rs 149.
  • Discount to net asset value (NAV) for some ETFs is around 10%.
  • Price correction in international markets stabilized at $4,050/ounce for gold and $48/ounce for silver.

Sources:

  • TIMES NEWS NETWORK Mumbai, citation not provided.

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