Gold ETFs lose steam, investors pull out Rs 2.90 bn in Apr-Oct; AUM down 8%

Gold exchange-traded funds (ETFs) continued to lose steam, with investors pulling out Rs 2.90 billion during the April-October period of the current fiscal.

In comparison, 14 gold-linked ETFs had witnessed a withdrawal of Rs 4.22 billion in the first seven months of 2017-18, latest data with industry body Amfi showed.

The assets under management (AUM) of gold funds went down by 8 per cent to Rs 46.21 billion at the end of October this year from Rs 50.17 billion a year ago.

Gold ETF trading has been tepid during the last five financial years. It saw an outflow of Rs 8.35 billion in 2017-18, Rs 7.75 billion in 2016-17, Rs 9.03 billion in 2015-16, Rs 14.75 billion in 2014-15 and Rs 22.93 billion in 2013-14.

However, the segment had witnessed an infusion of Rs 14.14 billion in 2012-13.

Industry experts said smart returns given by the equity market have resulted in Indian investors largely staying away from investing in gold ETFs. In fact, redemptions have been seen in the last five years.

They said that Indian investors have traditionally preferred to hold gold in physical form, rather than ETFs which are actually a better form of holding from an investor's perspective. Ideally, investors should look to allocate 5-10 per cent of the portfolio towards gold, which works as a portfolio hedge and helps reduce overall portfolio volatility.

Gold ETFs are passive investment instruments that are based on price movements and investments in the metal.

On the other hand, equity and equity-linked savings scheme (ELSS) saw an infusion of over Rs 750 billion in the April-October period of the ongoing fiscal (2018-19). This included over Rs 140 billion in the last month alone, according to the data.

Overall, mutual fund schemes witnessed a net inflow of Rs 810 billion in April-October period of the current fiscal.