New Gold ETFs Hit Indian Market


"Are gold ETFs beginning to crowd India?"

Are gold exchange traded funds (ETFs) beginning to crowd India, one of the largest bullion markets in the world? Several big companies are launching new Gold ETFs to cash in on the investor frenzy surrounding India's paper gold market.

On Thursday, diversified financial services company Religare announced the launch of a new bullion ETF—the Religare Gold ETF. The new fund is the seventh Gold ETF to hit the Indian market. Another corporate major Tata Group is also said to be finalizing its Gold ETF under the Tata Mutual Fund.

Some analysts said the entry of new Gold ETFs is crowding the already thin investment market for such funds in India.

India's gold volumes under the ETFs rose 55% on year to 8.265 tons in December, 2009.

"Gold collections by Gold ETFs in India are negligible compared to the physical trade of some 700 tonnes of the yellow metal. Therefore, I do not think the new launch of gold exchange traded funds is going to make much of an impact," said Vineet Mehta, a bullion analyst based in New Delhi.

But bullion optimists said the entry of new gold funds will expand the investment potential for Gold ETFs in India.

Launched in 2007, Gold ETFs in India are now managed by seven fund houses that include Religare Mutual Fund, State Bank of India Mutual Fund, Benchmark Asset Management, UTI Mutual Fund, Kotak Mahindra Mutual Fund, Reliance Capital Asset Management and Quantum Mutual Fund.

R S Srinivas Jain, senior vice president and chief marketing officer of SBI Mutual says 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 exchange traded fund in gold," he said.

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe