In the nation known to the world as the biggest guzzler of gold, the yellow metal in paper form is not exactly hot, but it most certainly is warming up. Come Tuesday, UTI Mutual Fund’s gold exchanged traded fund (ETF) is set to list on the National Stock Exchange, and its principals are optimistic.
Unlike jewellery, biscuits and coins, ETFs do not glitter on the necks of rich housewives but as an investment option, they make sense – holders can buy and sell them like any mutual fund unit, priced at one gram to a unit, without worrying about quality, security or storage issues.
Demat (dematerialised) accounts are a must to buy gold ETFs. Simrat Saluja, a customer care executive, finds the gold ETF ideal, and has put in Rs 10,000, a tiny amount for traditional gold investors.
"It is the only transparent way to save yourself from cheating in gold buying. And the other thing is that I won’t have to pay locker charges in this scheme," she said.
Mutual fund officials say the two gold ETFs launched so far, the Benchmark ETF and UTI Mutual Fund’s ETF, have drawn an enthusiastic response. About 41,000 investors have so far applied for the gold ETFs, and have pumped in Rs 235 crore between them. An NSE listing that reflects the Net Asset Value (NAV) of a unit is the clincher. Investing in gold can now be as easy as calling your broker, not visiting your jeweller.
Benchmark’s gold ETF listed on March 19, after its new fund offer received 15,000 applications and around Rs 100 crore.
Rajan Mehta, Executive Director, Benchmark Asset Management Company says, "After listing we have seen many new investors being added into the fund and many existing investors adding extra units. Another impact is that the trading has been orderly after listing and the real time price quoted has been in line with the NAV."
But no one expects a fast scale-up.
"We expect that the gold ETF being a new concept would take a little time before it kicks off," said AK Shridhar, investment manager at UTI fund. "Over the next two years, we expect gold to emerge as a strong asset class and the gold ETF as an efficient manner to have the asset class in your portfolio".
Old-world jewellers don’t think that gold ETFs have affected their business.
"We don’t find any change in the gold business whether it’s jewellery or biscuits purchasing for investment. As India is big country of wide population with different mindsets, there is a large number of people who prefer to store gold in material form rather than in papers," said Pawan Gupta, managing director of Delhi’s PP Jewellers.