Silver ETFs get the green light, but are they worth investing in?
At its board meeting on Tuesday, the Securities and Exchange Board of India (Sebi) allowed mutual fund houses to introduce silver exchange-traded funds (ETFs) into the Indian market.
Unlike gold ETFs, which are backed by physical gold in India, there are currently no silver ETFs.
The introduction of gold and crude oil ETFs has long been the industry demand in India.
Experts believe that precious metals like silver, platinum, and palladium can be a way to diversify your portfolio away from a single precious metal.
Gold, along with silver, has been a preferred asset class for dozens of Indians over the past few decades.
Nippon India ETF Gold BeES is the largest gold ETF in India with assets under management (AUM) of more than ₹6,000 million euros. This is followed by HDFC Gold ETF and SBI ETF Gold with an AUM of ₹2,682 crore and ₹2,354 crore or
“We welcome Sebi’s decision to allow silver ETFs to be launched in India. It expands the ETF bouquet available to investors. The physical silver market in India is deep enough to support silver ETFs. Gold ETFs have been around since 2007 and the investor base continues to grow rapidly, “said Vishal Jain, Head – ETF, Nippon Life India Asset Management Ltd.
Since gold ETFs closely track the development of precious metal prices, most systems are up to 10% in the red every year.
Experts say that while silver, while often correlated with gold, can sometimes have its own independent demand and supply dynamics.
“From a diversification point of view, silver ETFs can be considered. But those are still young days. Silver is used industrially, so in some ways we can participate in the real economy through silver as opposed to gold, “said Suresh Sadagopan, founder of Ladder7 Financial Advisories and an investment advisor registered with Sebi.
However, Sadagopan believes there could be some problems with silver ETFs.
“First, unlike gold, silver is bulky, which can increase inventory and storage costs. So we have to see if these ETFs are valued at an appropriate level or not. The second concern is that gold and silver have some correlation and we still have to ponder whether it makes sense to invest in silver ETFs separately, ”he added.
In India, people are now investing in silver through traditional routes such as silver bars, silver coins and silver jewelry, or through paper forms of silver such as futures.
According to Priti Rathi Gupta, founder, LXME, a financial platform for women, investors tired of the complexities of futures contracts and the dangers involved might find this mode (silver ETFs) more convenient.
“Although silver and gold work in parallel, silver has its own market dynamics. Therefore, silver can also be a great success in the financial markets for private investors, “Gupta said in a press release.
However, experts advise caution.
Kaustubh Belapurkar, Director-Manager Research at Morningstar India, believes that investors should exercise caution in their investment and allocation as the price of silver, like any other commodity, can be volatile.
Never miss a story again! Stay connected and informed with Mint. Download our app now !!