As SEBI paves way for silver ETFs, an explainer on what are these?

Vimal Joshi
Updated: 15 Dec 2021, 04:59 PM IST
TL;DR.

After SEBI gave its go-ahead to silver ETFs, mutual funds in India will soon launch this much-awaited asset class. Let us decode how these exchange traded funds would work

For quite some time, the mutual fund industry and investors have been demanding the introduction of silver ETFs in Indian markets.

For quite some time, the mutual fund industry and investors have been demanding the introduction of silver ETFs in Indian markets.

The market regulator SEBI recently gave in principle approval to launch silver ETFs (exchange traded funds) in India. As of now, mutual funds in India are allowed to manage the funds to track gold prices. These funds are known as Gold ETFs.

With the new rules in place, asset management companies will soon be able to offer silver ETFs as well.

It is no surprise that gold ETFs are reasonably popular among Indian investors, which indicates the keenness with which investors are waiting for silver ETFs to hit the markets.

The total assets managed by Gold ETFs are 16,350 crore as on August 31, 2021, according to the AMFI (Association of Mutual Funds in India) data. Gold has been a reliable asset for Indian families for several generations. Aside from this, there are sovereign gold bonds issued by the central bank.

For quite some time, the mutual fund industry and investors have been demanding the introduction of silver ETFs in Indian markets.

Silver ETFs

As expected, the asset management companies (AMC) will be supposed to keep underlying silver bars for offering silver ETFs. There are essentially two ways to track silver prices – one by derivatives and the other by holding physical silver bars.

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We explain what are silver ETFs.

It is important to note that silver is relatively more volatile than gold. And mutual funds are meant to hold physical gold for gold ETFs in India.

Although it is some time before silver ETFs start trading in the Indian stock markets. But as of now, investors who are keen to get exposure to silver can do so either via physical silver or through commodity futures on a commodity exchange.

 

First Published: 15 Dec 2021, 04:59 PM IST
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