Gold ETFs add over 1.36 lakh new folios in May, fastest in 60 months. AUM per folio 3rd best in 2 years
Thu June 20 2024
Gold ETF schemes added 136,772 folios in May which was a 12.5% year-on-year jump over the previous year. It was also the fastest growth in new folio additions versus an average of 45,543 since May 2023. A growing tribe of investors are now opting Gold ETF mutual schemes over other bullion options for a variety of reasons including easy availability, liquidity and low investment ticket size. The number of folios for Gold ETFs stood at 53,20,483, up from 47,28,425 in May 2023. On a sequential basis it was up by 2.6% versus 51,83,711 in April when 1.22 lakh new folios were added.
May also saw higher net inflow at Rs 827 crore as against net outflow of Rs 400 crore in April.
Sriram BKR, Senior Investment Strategist at Geojit Financial Services, said that drop in prices of gold in May from April's lifetime highs could be a prominent factor why folios and inflows increased.
May recorded the second highest net inflows in Gold ETFs at Rs 827.43 crore in 2024, trailing February when the net inflows were reported at nearly Rs 1,000 crore.
"After posting near 5 year high outflows (3rd low in 60+ months), Gold ETF turned with robust net inflows of Rs 827 crore in May 2024. The folio additions in April and May were the second most in more than 60 months," Sriram BKR said.
With gold prices seeing a drop in the last month, there was some downward correction in the net asset value (NAV) of Gold ETFs as gold is the underlying asset and any change in the price has a bearing on its NAV.
As per the data available on Ace Equities, average returns of 16 Gold ETF schemes fell by 1.87% over the last two months. Their Net Asset Value (NAV) has also witnessed a climbdown from May 21 peak.
Anuj Gupta, Head Commodity & Currency, HDFC Securities, sees the hand of short-term investors and swing traders behind the May traction, arguing that they tried to capture short-term technical opportunities that came their way as a result of 6% correction in April itself following a strong rally which saw gold scaling new peaks in that month.
The rally again picked up in May culminating in a fresh lifetime high of Rs 74,777 on May 20 when the Gold ETFs’ NAV hit their highest levels. Since then they have remained below their respective peaks.
Gold ETFs bring a compelling choice when plunging into gold and may see further traction, going ahead, Siddharth Alok AVP Investments at Multi Ark Wealth / Epsilon Money Group, said. While he refrained from attributing lower NAV or price correction as a major reason for the May traction, he referred to new trading strategies opening avenues for investors as they have started speculating as well.
In May, the total assets managed by 17 Gold ETF schemes stood at Rs 31,689.35 crore which was down from Rs 32,789 crore in April. In the first two months of FY2025, the AUM is up 1.5% over the previous financial year's closing.
AUM per folio in May stood at Rs 59,561 which was third best in over 2 years, though down by 5.8% on a MoM basis.
Gupta sees recent corrections as a favorable opportunity to begin investing in gold gradually and a further 5%–6% should be used to add more metal.
Investment rationale
Sriram BKR said that Gold ETF offer better liquidity than avenues like Sovereign Gold Bonds (SGB) but he would prefer the latter from a medium to long-term return perspective because of the interest component.
Alok's advice to investors is to keep a track on daily I-NAV i.e. intrinsic net asset value as AMCs buy actual gold in ETFs and in his views their prices should replicate the real time prices of gold. "Sometimes, prices do go haywire, hence caution is needed before buying," he warned.
Sriram BKR of Geojit sees electronic form of gold as a better choice and within that SGB as preferable. New units should be added on dips and investors should not chase the returns, he added. As monitorables for gold investment, he recommends a watch on import duty changes and INR-USD movement.
Source: https://economictimes.indiatimes.com/