Modi 2.0: Gold ETFs’ AUM jumps 565% to Rs 32,800 crore in 5 years, folios rise by 1,483%

Gold ETFs, a popular avenue for investment in yellow metal, have seen assets under management (AUM) go up by a whopping 565% between June 2019 and April 2024, a period which coincides with Modi government’s second term at the helm.

According to data extracted from Association of Mutual Fund in India’s (Amfi) website, the AUM has jumped from Rs 4,930.44 crore in June 2019 to Rs 32,789 crore in April this year. Meanwhile, the number of folios has surged 1,483% during the said period from 3,27,515 in June 2019 to 51,83,711 in April 2024.

Folio is a number which is generated when an investor makes his first investment in a mutual fund scheme. It remains the same for all subsequent investments in the same plan made by the investor.

With 12 Gold ETF schemes active then, the number has swelled up to 17 in the month gone by.

ICRA Analytics also reveals a paradigm shift in investor behaviour towards gold ETFs in India, driven by factors such as perceived safety, attractive returns, and the convenience ETFs offer. Senior Vice President and Head Market Data, Ashwini Kumar said that a significant number of Gold ETFs have delivered exceptional one-year returns exceeding 18%, and are governed by tight regulations making them a safe investment option.

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While the domestic gold ETF segment is much smaller than the global size, the appetite for it in India has increased at a faster pace than the rest of the world. The global market share of Indian Gold ETFs holdings in January 2019 was around 0.6% which has grown to 1.45% as of April 2024.

“In 2019, the domestic holding stood at 14.68 tons as of January 31, 2019, which now has shot up to 44.65 tons at the end of April 2024, giving absolute returns of 204%,” Jigar Pandit, Senior Vice President & Commodity Head at Sharekhan said.

At the same time, global gold ETF holding was recorded at 2,549 tons in January 2019, which by the end of April 2024 jumped to 3080 tons, giving an absolute growth of 21%, the Sharekhan analyst said.

Robust returns

India's gold story has also piggybacked on shinier returns back home versus its off-shore counterpart.

Gold as an asset class has seen its fortunes grow by 15.27% between 2019 and April 2024 year, Anuj Gupta, Head Commodity & Currency, HDFC Securities said.

Pandit says that gold's returns in Indian rupee terms have outgrown the returns by Comex gold in the last 10 years. Yellow metal's outperformance in India has been on account of softening in the INR which has depreciated by around 38% in absolute terms since 2014, he reasoned.

"Indian gold has appreciated around 140% in absolute terms or 9% CAGR since 2014, while Comex gold is up 78% in absolute terms or given a 6% CAGR for the same period," this analyst said further.

Pandit attributed this rise to the growing awareness of financial products and booming equity markets which in his view have collectively triggered a departure from traditional gold-buying practices. "We are seeing value-added products like Gold ETFs and SGB providing Indian investors ways to invest in gold," he said.

Gold is seen as a hedge against uncertainties including inflation, and geopolitical tension and is recommended by experts for portfolio diversification.

Between January and March 2024, gold ETFs witnessed net inflows of Rs 2028.05 crore as against net outflows of Rs 300.58 crore in the corresponding period in 2023. In April Gold ETF funds saw outflows of Rs 396 crore.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)