Sebi allows the launch of silver ETFs by mutual funds in India

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Markets regulator, the Securities and Exchange Board of India (Sebi), in its board meeting on Tuesday allowed mutual fund houses to introduce silver exchange-traded funds (ETFs ) in the Indian market. 

There are no silver ETFs, unlike the gold ETFs that are backed by physical gold in India. The launch of gold and crude oil ETFs have been the long-standing demand of the industry in India. 

 Experts say that precious metals such as silver, platinum and palladium can be a way to diversify one’s portfolio, away from a single precious metal. 

The Sebi board met in Mumbai today under the chairmanship of Ajay Tyagi. 

“The board approved an amendment to Sebi (Mutual Funds) Regulations, 1996 to enable the introduction of silver exchange-traded funds with certain safeguards in line with the existing regulatory mechanism for gold ETFs,” Sebi said in a notification after the board meeting. 

Gold along with silver has been a preferred investment class for scores of Indians over the past many decades. 

Nippon India ETF Gold BeES is the biggest gold ETF in India with assets under management (AUM) of over 6,000 crore. It is followed by HDFC Gold ETF and SBI ETF Gold with AUM of 2,682 crore and 2,354 crore, respectively. 

“We welcome the Sebi’s decision to permit silver ETFs to be launched in India. It expands the bouquet of ETFs available to investors. The physical silver market in India is sufficiently deep to support silver ETFs. Gold ETFs have been in existence since 2007 and continue to see a rapid expansion in investor base,” said Vishal Jain, head-ETF, Nippon Life India Asset Management Ltd. 

Since these funds closely track the performance of gold prices, most schemes have been in the red up to 10% on a yearly basis.  

Experts say that, even though silver is often correlated to gold, it may have its own independent demand and supply dynamics. 

Since as per Sebi, Silver ETFs may be launched in line with the existing regulatory mechanism for gold ETFs, the existing rules may give us a hint on how the new asset class may work in India. 

As per the Association of Mutual Funds in India (Amfi), a gold ETFs unit represents physical gold, which may be in paper or dematerialized form. One Gold ETF unit is equal to 1 gram of gold and is backed by physical gold of very high purity. 

Gold ETFs are listed and traded on the National Stock Exchange of India (NSE) and Bombay Stock Exchange Ltd. (BSE) like a stock of any company. 

Buying Gold ETFs means you are purchasing gold in an electronic form.

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