The much-talked-about gold exchange traded fund (ETF) in India may not target retail consumers but, in all likelihood, will eye banks and mutual funds hoping to diversify their equities and fixed income portfolios.
Benchmark Asset Management Company Private Limited launched India's first gold ETF on February 15. Traders said they expect the fund to raise about Rs 650 million when it closes on February 23.
ETFs allow investors to gain exposure to commodity markets without setting up futures trading accounts or taking physical delivery. Sponsors of such funds buy a matching amount of the commodity from the market to keep it in bank vaults.
According to analysts, gold is no longer a seasonal commodity. There are so many funds and that is what ETFs could be targeting, wherever there is asset diversification needed.
Gold prices are expected to reach about $700 a troy ounce by June from about $655 now. Analysts said some retail customers may purchase ETFs as an investment which could always be converted into physical gold later. But it would take time for the instrument to gain popularity among them.
Jewellery accounts for 80 per cent of India's annual gold demand of some 800 tonnes. The country's one billion people buy nearly a quarter of the global sales. There are some 10 global bullion ETFs including in the United States, the UK, Australia, Turkey, Singapore and South Africa.
Such funds, trading on the world's major stock exchanges and backed by physical metal, have accumulated about 600 tonnes of gold nearly a quarter of annual mine output in the three years since the first launch.
Gold held in ETFs worldwide rose 66 per cent to 604 tonnes in 2006 the equivalent of China's official gold reserves.
Seven to eight ETFs are expected to be operational in India over the next one year, with most to be listed on the National Stock Exchange. UTI Gold Exchange Traded Fund will open March 1-12. Tata Asset Management Ltd, Prudential ICICI Asset Management and Kotak Mahindra Asset Management Co Ltd have filed offer documents.
ALSO READ:
Advertisement
Email this Article 
Print this Article