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Summary: An ETF listed in India climbed hard this week. The fifty companies it holds went the other way. Same shares, same week, two different answers. The gap is not a glitch and it has been widening quietly. What let it run this far was a rule change almost nobody noticed.
Between last Friday and Thursday, the Motilal Oswal Nasdaq Q50 ETF rose 41 per cent. The fifty companies it owns fell 2.6 per cent.
Same shares. How?
An ETF has two prices: the NAV (what the shares inside a unit are worth) and the market price (what the last buyer paid). Normally they match, because if the price drifts above NAV, a market maker gets fresh units from the fund house at NAV and sells them until the gap closes.
For international ETFs, that switch is off. India's $1 billion limit for overseas ETFs was filled in April 2024, and no new units have been created since. International funds that do not route through ETFs draw on a separate $7 billion limit, and that one is full too. That is why 59 of the 60 open-ended international funds are closed to lump sums. Only Baroda BNP Paribas Aqua FoF still accepts lump sums and fresh SIP registrations, though a handful of others continue to take instalments of SIPs registered earlier.
So the exchange is nearly the only door, and a door with a queue and no new supply charges a premium. For several months it ran about 20 per cent. Annoying, but stable.
So why did it blow up this week?
A lid came off. For four years an ETF’s daily price band was 20 per cent either side of its NAV from two days earlier. Nobody designed that as a cap on premiums, but it was one: the Q50 hit the 20 per cent wall on every burst of demand and stopped.
On September 7, SEBI’s new rule drew the band around the previous day’s traded price instead. This makes sense for ETFs that can create units. For the few that cannot, yesterday’s price already contains the premium, so the band is drawn around the premium, and it compounds.
The Q50 premium went 19.5 per cent on Friday, 38 on Monday (with the US market shut and the NAV unchanged), 67, 83, then 73 on Thursday. A unit closed at Rs 199.89. The shares inside were worth Rs 115.69. Rs 84 of every Rs 200 bought a place in the queue.
Price, value, and the gap between
| ETF | NAV (Rs) | Price (Rs) | Prem. Sep 10 (%) | Prem. Sep 4 (%) | Avg past yr (%) | Traded Sep 7-10 (Rs cr) | Usual daily (Rs cr) |
|---|---|---|---|---|---|---|---|
| Motilal Oswal Nasdaq Q50 | 115.69 | 199.89 | 72.8 | 19.5 | 14.8 | 97 | 1.4 |
| Mirae Asset S&P 500 Top 50 | 66.55 | 95.58 | 43.6 | 19.6 | 19.5 | 46 | 1.5 |
| Mirae Asset NYSE FANG+ | 172.14 | 225.70 | 31.1 | 19.6 | 19.7 | 108 | 5.6 |
| Mirae Asset Hang Seng TECH | 17.75 | 22.24 | 25.3 | 19.2 | 19.7 | 9 | 2.4 |
| Motilal Oswal NASDAQ 100 | 271.56 | 333.21 | 22.7 | 19.0 | 11.0 | 179 | 23.5 |
| Nippon India Hang Seng BeES | 452.25 | 466.06 | 3.1 | 2.5 | 14.4 | 13 | 8.1 |
NSE close over same-day NAV. Averages: Sep 10, 2025 to Sep 3, 2026.
The last two columns show a crowd: the Q50 traded Rs 43 crore on Wednesday, up from a usual Rs 1.4 crore a day. Hang Seng BeES, which nobody is chasing after a poor year, sits 3 per cent over NAV under the same rule. The closed door made the premium. The rule only lifted the lid.
Both fund houses put out notes on Wednesday. Mirae Asset advised against buying at a significant premium. Motilal Oswal showed the arithmetic: under the old rule the Q50 could not have closed above Rs 142.60 on Monday or Rs 142.48 on Tuesday; under the new one the ceilings were Rs 170.32 and Rs 196.91, and it closed within a rupee of each. The note says the price may keep rising 20 per cent a day. It does not say whether you should pay it.
You may be in this without knowing
Funds of funds value these ETFs at the exchange price, so the premium sits inside their NAV. The Mirae Asset S&P 500 Top 50 ETF FoF returned 25.6 per cent this week; the ETF’s NAV moved 0.4. The NYSE FANG+ FoF returned 8.9 per cent, versus 0.2. Whoever redeems now is paid at that price out of the assets of whoever stays, and when the premium closes, the FoF falls without the US market moving.
What happens next
SEBI’s circular moves the base back to the previous day’s NAV from April 1, 2027. It does not say what happens that morning to an ETF sitting 70 per cent outside its band. Regulators have two fixes: bring that date forward for the few ETFs with suspended creations, or reopen creations. Either erases the premium.
So: if you hold, the gap can close without warning, and nobody can short these units to catch the fall. If you are buying, look up the NAV before the price. If the price is far above it, you are buying a shortage, not Nasdaq. If you are in a fund of funds, the same, one step removed.
Until next week.
Checking price against NAV is one habit. Knowing whether a fund still belongs in your portfolio is another. Value Research Fund Advisor reviews what you already own, says what to let go of and builds the rest around your goals.
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