Gold exchange-traded funds (ETFs) in India are losing momentum, with investors pulling out Rs 29,000 crore during the April-October period of the current fiscal.
Fourteen gold-linked ETFs had witnessed a withdrawal of Rs 42,200 crore in the first seven months of 2017-18, latest data from industry body AMFI (Association of Mutual Funds of India) showed.
The assets under management (AUM) of gold funds went down by 8 per cent to Rs 4,62,100 crore billion at the end of October this year from Rs 5,01,700 crore a year ago.
Gold ETF trading has been tepid during the last five financial years. It saw an outflow of Rs 83,500 crore in 2017-18, Rs 77,500 crore in 2016-17, Rs 90,300 crore billion in 2015-16, Rs 1,47,500 crore in 2014-15 and Rs 2,29,300 crore in 2013-14.
However, the segment had witnessed an infusion of Rs 14.14 billion in 2012-13.
Industry experts said smart returns given by the equity market have resulted in Indian investors largely staying away from investing in gold ETFs. In fact, redemptions have increased in the last five years.
They said that Indian investors have traditionally preferred to hold gold in physical form, rather than ETFs which are actually a better form of holding from an investor’s perspective. Ideally, investors should look to allocate 5-10 per cent of the portfolio towards gold, which works as a portfolio hedge and helps reduce overall portfolio volatility.
Gold ETFs are passive investment instruments that are based on price movements and investments in the metal.
On the other hand, equity and equity-linked savings scheme saw an infusion of over Rs 75,000 crore in the April-October period of the ongoing fiscal (2018-19). This included over Rs 14,000 crore in the last month alone, according to the data.
Overall, mutual fund schemes witnessed a net inflow of Rs 81,000 crore in April-October period of the current fiscal.