Sebi may allow metal ETFs to attract retail investors

Market regulator Sebi is considering allowing exchange-traded funds (ETF) based on metals like silver and platinum to encourage participation of retail and institutional investors in these market instruments, senior officials said.

In global markets ETFs are based on equities, commodities and metals but in India these funds are based on equity and gold only.

The move is expected to help investors participate in a market upside with lower risk and volatility, and spread their risk better.


Senior officials said that the Securities and Exchange Board of India (Sebi) is planning to permit ETFs based on metals such as silver and platinum.

"In a growing economy like India which is likely to become commodity intensive with policy push on infrastructure creation and initiatives such as 'Make in India', the launch of metal ETFs would provide access to retail and institutional investors to track economic growth of commodity intensive economies," MCX Research Head V Shunmugam told PTI.

Further, it would make the 'price discovery' mechanism of metal markets more robust, he added.

Quantum Mutual Fund CEO Jimmy Patel said that the fund house will launch silver ETFs as and when Sebi will come out with guidelines in this regard.

"The great advantage of having metals ETFs will be to invest in certain sectors without loading up too much on equities," he added.

An exchange traded fund, an open-ended mutual fund scheme, tracks its underlying index and invests in same stocks as constituted in the index.

Further, Finance Minister Arun Jaitley in his budget speech for 2018-19, said that more ETFs will be launched as well as a debt ETF too.

Sebi had recently floated a consultation paper on the modalities of permitting mutual funds and portfolio managers in commodity markets, and the guidelines in this regard may soon get issued by the markets regulator.

"Once mutual funds are allowed in commodity markets, it is expected that there may be ETFs on several commodities, particularly in metal and energy space," Shunmugam added.