Bourses eye brisk biz in gold ETFs tomorrow, waive off charges

NSE and BSE to allow trading of gold ETFs till 7 PM tomorrow and have waived off the transaction charges for the same

It is considered auspicious to buy gold on the day of Akshaya Tritiya and the exchanges and fund houses are looking to cash in on the opportunity by hard-selling the gold ETFs, which allow the investors to trade in yellow metal in electronic format like shares or other securities.

Gold ETFs track physical prices of the yellow metal and each unit of ETFs is generally equivalent to one gram of gold. Over a dozen gold ETFs are listed on bourses.

Both the leading stock exchanges NSE and BSE have decided to extend the trading session for gold ETFs tomorrow beyond the normal market hours of 9 am to 3.30 pm. They can be traded till 7 PM tomorrow on this special occasion.

Besides, the bourses have decided to waive off the transaction charges for trades in gold ETFs on that day.

The National Spot Exchange Limited (NSEL) has also waived off transaction charges and conversion charges pertaining to physical conversion of demat units. Accordingly, there would be no transaction charges for all transactions of e-Gold, e-Silver and e-Platinum on May 13, it said.

"Prospective buyers remain upbeat as the upcoming marriage and festival season along with Akshaya Tritiya hint at higher gold demand from Indian investors," said Reliance Mutual Fund in an outlook report for the day.

The market participants say that gold ETFs offer many benefits over the physical gold, such as lower costs, greater transparency, purchase in small units and an easier exit.

Akshaya Tritiya gold ETF volumes on NSE surged to Rs 608 crore in 2012, a growth of 43% from the previous year.

According to BSE, gold ETF turnover has soared almost 20 times between 2009 and 2012 calendar year to Rs 1,839 crore, indicating a growing investor preference for ETFs. In April this year, a turnover of about Rs 700 crore was recorded in gold ETF.

Experts say that 18% correction in gold ETF prices from peak in November 2012 will attract more investors this time, given an average return of 20% from Akshaya Tritiya to Akshaya Tritiya in last 10 years till 2012.

"From a short-term perspective, there may not be much upside but there are good gains to be made in gold on a 2-3 year horizon," said Kishore Narne, Associate Director, Head-Commodity & Currency, Motilal Oswal Commodity Broker.

Data shows the number of clients trading gold ETFs between 2008 and 2012 has risen in metros as well as smaller cities. Mumbai, the financial capital of India, accounts for over 12% of the total investors in gold ETF during the period.

Delhi has been adding new investors to this asset class at CAGR of 41% in the same period. Smaller cities like Vadodara and Surat have also added new investors at over 30%.