Commodity Online
MUMBAI: India's largest public sector bank--State of Bank of India (SBI)--on Monday launched a gold exchanged traded fund (Gold ETF) with an ambitious plan to collect at least 1.5 billion rupees ($29.7 million) to 2.0 billion rupees of investments to begin with.
The Gold ETF from the Mutual Fund division of SBI is the sixth exchange traded fund in the yellow metal to hit the Indian markets. Banks and financial institutions are getting ready to launch new Gold ETFs and gold schemes as India is the largest consumer market for gold in theh world.
SBI officials said on Monday that the Gold ETF will be open up for subscription till April 28. The fund will be then listed on india's National Stock Exchange.
R S Srinivas Jain, senior vice president and chief marketing officer of SBI Mutual said that the bank is bullish on the growth of Gold ETFs in India. "We feel that India has a great potential for more Gold ETFs. We are planning to raise good money through the exhange traded fund in gold," he said.
He said the fund house - a joint venture between State Bank of India and France's Societe Generale Asset Management - plans to market the scheme through the state-owned bank's branches.
The SBI Gold ETF will be benchmarked against the London AM fix price - spot price set in the morning - and the gold will be imported by Bank of Nova Scotia on behalf of SBI Mutual.
Returns on India’s five gold ETFs increased by 6 per cent during the month as the yellow metal touched a new high.
Launched in 2007, Gold ETFs in India are managed by five fund houses including Benchmark Asset Management, UTI Mutual Fund, Kotak Mahindra Mutual Fund, Reliance Capital Asset Management and Quantum Mutual Fund.
Though Gold collections under the ETFs are growing in India year on year, they remain negligible when compared to India’s imports of around 700 tonnes annually.
ETFs track the performance of a particular index; their base price is basically equivalent to the value of the index. ETFs are not limited to gold. There are ETFs of almost all metals and most-traded agro-commodities. Eg: Gold, silver, copper, wheat, corn, cotton etc. At present, in India gold is the only commodity ETF.
Analysts say those who made money from gold ETFs in the past few months also should thank Indian rupee. Because, rupee’s steady depreciation helped investors gain handsomely from gold ETFs. Over the past year, international gold prices have headed nowhere and are actually down by about 3 per cent. But the gains came from the rupee fall.
In India gold prices rose roughly 40 per cent the past year. Going forward, therefore, returns for Gold ETF investors will depend not only how global gold prices fare, but also on the direction of the rupee against the dollar.
Apart from Gold ETFs, Indian investors looking for gold-related investments have the option of global gold equity funds, which invest in the stocks of gold mining companies.
However, these funds, having been battered last year, have staged a sharp rebound since early December. Both DSP BlackRock World Gold Fund and AIG World Gold Fund have delivered a 35 per cent return from early December, tracking the simultaneous recovery in equity markets as well as gold prices.
As commodities and stocks fell in tandem, gold mining stocks were battered by investors, even as gold, in the commodity markets, held up fairly well as safe-haven demand continued to flow in.
However, gold mining stocks have staged a recovery since December as a more favourable environment emerged for equity markets in general, even as gold prices too climbed.
