According to sources, a few large fund houses are already working on proposals to launch ETFs for silver, as they have now been formally allowed to trade even in the commodity derivatives segment. Source also said mutual funds were waiting for a custodian to be ready for trading on commodity exchanges.
India Mutual Fund spokesperson said: "Commodities are an important asset class for us. Nippon
Gold BeES was the first Gold ETF
in India. As and when the regulations permit, we will be interested in expanding our product suite for commodity-linked ETFs.”
In 2010-11, Sebi had allowed the launch of a silver ETF
and the National Stock Exchange (NSE) had issued a circular. However, NSE later withdrew its permission following objections from the Forward Markets
Commission (the then regulator for commodities derivatives) and Sebi. The silver ETF could, therefore, not be launched. Gold ETF, on the other hand, was first launched in 2007 by Benchmark Assets Management, now under Nippon.
ICICI Assets Management Company, another mutual fund company with big plans for the commodities market, also has silver ETF high on its priority list. The company has, according to sources, already enabled hybrid schemes for investment in commodity derivatives, in line with Sebi regulations. The company has been working on a silver ETF for some time.
All fund houses, including Nippon and ICICI AMC, are awaiting custodians before they can start offering their commodity services. As of now, only one custodian is ready and MFs want more. Exchanges are said to be pushing a few banks to launch custodian services for commodities; this will also facilitate MFs’ participation in commodity derivatives apart from ETFs.
Chintan Haria, product head, ICICI AMC, said: “It is encouraging that the regulator has allowed mutual funds to participate in the commodities segment. We are exploring the possibility of introducing products in this segment, subject to regulatory approvals.”
To allow gold ETFs, the finance ministry had specifically notified gold as a security. But a similar decision for silver never came, so silver ETFs
were not permitted.
According to data from Metal Focus, all exchange-traded products globally were holding 19,840 tonnes of gold in 2018. Physical investment in the commodity during the year stood at 5,155 tonnes, of which 1,680 tonnes worth of investments were in India alone. Metal Focus said Indian investors had bought a hefty 10,646 tonnes in the five years through 2018.