Investors exit gold ETFs, withdraw Rs 695 crore in 11 months

Asset base of gold ETFs dropped to Rs 5,766 crore at end of Feb from Rs 6,346 crore in March-end

Gold exchange-traded funds (ETFs) saw a net outflow of Rs 46 crore in February, taking the total to Rs 695 crore in the first 11 months of the current fiscal, primarily on account of profit booking.

The outflow meant asset under management (AUM) of gold funds plunged by 10 per cent so far in the current financial year.

Trading in gold ETF segment has been tepid during the last three financial years. They had witnessed an outflow of Rs 903 crore, Rs 1,475 crore and Rs 2,293 crore in 2015-16, 2014-15 and 2013-14, respectively.

However, the pace of outflow slowed in 2015-16 as against the preceding two years on account of a sluggish equity market.

According to the latest data available with Association of Mutual Funds in India (Amfi), a net sum of Rs 46 crore was pulled out of 14 gold-linked ETFs in February as compared to Rs 35 crore in January this year.

This takes the total outflow to Rs 695 crore in the first 11 months (April-February) of the ongoing fiscal, 2016-17.

The asset base of gold ETFs dropped to Rs 5,766 crore at the end of February from Rs 6,346 crore in March-end.

"Barring October, gold ETFs have seen net outflows for the whole of this fiscal. October saw net inflows propping up marginally on festival demand and that trend reversed in November and outflow continued till January," FundsIndia.Com Head of Mutual Fund Research, Vidya Bala said.

"Domestic gold delivered about 15 per cent in the past one year could also have seen some investors, who were waiting for opportunities to exit, book profits in the instrument," she said.

Gold ETFs are passive investment instruments that are based on gold prices and invest in gold bullion. There is a complete transparency on the holdings of an ETF because of its direct gold pricing.