The first Indian Gold ETF launched by Benchmark Mutual Fund mopped up Rs 100 crore during the new fund offer period. The fund will list on NSE soon
27-Feb-2007 •News Desk
Indian investor's attachment to gold shone brightly, as Benchmark mutual fund's Gold Exchange Traded Fund (ETF) managed to mop up Rs 100 crore. Benchmark has managed to collect this corpus at a time when gold prices are hovering at seven month high levels. The fund house was the first to file a proposal for a gold ETF way back in the year 2002, but managed to launch it only after the recent nod from SEBI. This makes India only the sixth country where gold ETF is traded.
The fund offers a unique proposition to investors combining a traditional asset class such as gold with the modern dematerialised form of investing. It will list on the National Stock Exchange soon, where investors can buy and sell its units just like stocks.
Since the units will be traded on the exchange, unlike the open-ended mutual funds, the actual buying and selling price may quote at a premium or discount to the net asset value. However, the difference in the traded price and NAV is not likely to be very large.
Hitherto, a small investor turned either to jewellers or banks for purchasing gold. While banks provide assurance on quality, there is no secondary market for this gold. Most jewelers would buy back gold but at a high discount. Gold ETFs fill the lacunae of quality considerations, liquidity, safety and convenience in gold investing.
As per the securities watchdog, SEBI's guidelines, the gold traded here would be valued at the AM fixing price of London Bullion Market Association (LBMA) in US dollars, and the metal can be retained only in the form of standard bars which comply with the good delivery norms of the LBMA.
UTI mutual fund is the next in line to launch such an ETF with the NFO slated to open on March 1, 2007. Many more fund houses have filed their draft offer documents, pending clearance from SEBI, with a fund of funds option in gold ETF also in the offing.