Gold ETFs see Rs 274-cr outflow in Apr-Sept FY19, asset base slumps 14%

Gold exchange-traded funds (ETFs) continued to lose steam with investors pulling out Rs 274 crore from the instrument in the April-September period of the current fiscal.

In comparison, 14 gold-linked ETFs had witnessed a withdrawal of Rs 388 crore in the first half of 2017-18, latest data with industry body Amfi showed.

The assets under management (AUM) of gold funds plunged 14 per cent to Rs 4,434 crore at the end of September this year, from Rs 5,148 crore a year ago.

Trading in gold ETF segment has been tepid during the last five financial years. It saw outflow of Rs 835 crore in 2017-18, Rs 775 crore in 2016-17, Rs 903 crore in 2015-16, Rs 1,475 crore in 2014-15 and Rs 2,293 crore in 2013-14.

However, the segment had witnessed an infusion of Rs 1,414 crore 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 Rs 60,475 crore in the first half of the ongoing fiscal (2018-19). This included over Rs 11,000 crore in the last month alone, according to the data.

Overall, mutual fund schemes witnessed a net inflow of Rs 45,765 crore in April-September period of the current fiscal.