NSE saw trading of only Rs. 40 crore compared to Rs. 1337 crore last year on Dhanteras.
Owing to supply constraints and high gold prices, trading volumes of gold ETF declined drastically on both the bourses NSE and BSE on Dhanteras. The demand for gold generally shoots up during Dhanteras which is considered to be an auspicious day for buying the yellow metal. However, the trend was reversed despite recent slash in tariff of gold import.
NSE recorded trading volume to the tune of Rs. 40 crore as against Rs. 1337 crore on Dhanteras last year. BSE saw trading worth Rs. 297 crore compared to Rs 894 crore last year. More than 10 lakh units were traded in gold ETF of BSE on Dhanteras.
Chirag Mehta, Fund Manager - Commodity, Quantum MF attributes this decline to high premiums in gold prices. He says, “Due to shortfall in supply, the physical gold units were traded in high premium on Dhanteras which was reflected in gold ETF trading too.”
Aashish Somaiyaa, CEO, Motilal Oswal seconds the view and points out huge gap between NAV and traded price of gold ETFs on Dhanteras due to supply constraints.
DP Singh, CMO - Domestic Markets, SBI Mutual Fund, believes that sharp volatility in gold prices has affected the trading volume of gold ETF. “Last year, gold prices were quite stable compared to this year. Hence, investors have refrained themselves from investing in gold ETFs on Dhanteras.”
“Unlike last year, AMCs have not promoted gold ETFs to push their sales on Dhanteras due to widening to current account deficit. Also, common investors are uncertain about the trend in the gold prices,” says Debashish Mallick, CEO, IDBI MF.
A senior official from a top fund house says that RBI and government have jointly put efforts to discourage investments in physical as well as paper gold units by not accepting gold as collateral and raising import duties respectively.
Suresh Sadagopan of Ladder7 Financial Advisories believes that people have lost their interest in gold. “Gold had given decent returns two years back. But, the interest seems to be tapering off now. Most of gold returns are largely due to rupee depreciation. Gold has delivered 2% returns in terms of dollar and 15% returns in terms of INR because of rupee depreciation.”
Gold ETFs have delivered negative returns of 5.77 % returns in the last one year. Today, 14 fund houses provide Gold ETFs which together hold assets worth Rs. 10415 crore as on September 2013.
The largest pie in the Gold ETF market is held by Goldman Sachs which manages Rs. 2828 crore followed by Reliance (Rs. 2566 crore), SBI (Rs. 1381 crore), (Kotak Rs. 1106 crore), HDFC (Rs. 813 crore), UTI (Rs 662 crore). Many AMCs have launched gold fund of funds, which invest in gold ETFs for those who do not possess demat accounts.
