You may soon get to trade Silver ETFs | Economic Times

Mumbai: Silver-backed exchange-traded funds (ETF), one of the most popular products globally, may soon find their way into India. The capital-markets regulator will consider a proposal allowing mutual funds to launch bespoke plans that mimic the price moves of silver, creating an affordable and liquid investment proxy for the precious metal that has robust local demand.The proposal was discussed in a recent meeting of the Mutual Fund Advisory Committee, appointed by the Securities and Exchange Board of India (Sebi). The regulator may soon accept the recommendations of the panel unless there are legal or operational hurdles.“There is a lot of demand for Silver ETFs but there are fewer investment options for investors. Sebi and the (mutual fund) industry want to address that,” said a person privy to the discussions. An email query to Sebi went unanswered till press time.The introduction of Silver ETFs has been a long-standing demand from market participants. Currently, domestic investors and traders must either buy the metal physically or use commodity derivative instruments to trade in silver. Savvy investors buy Silver ETFs listed overseas through various broking platforms, but many are not comfortable with this alternative.Furthermore, it is inconvenient to purchase physical silver as it tends to be bulkier than gold. Purity is a concern and storage a hindrance.But their prices have weakened of late after the US Fed recently hinted at raising interest rates earlier than what the market expected to combat inflation.Silver ETFs will give mutual funds and asset managers one more option to enhance their asset allocation products.To be sure, some industry officials are more circumspect.“Silver ETFs will be a good option for investors but for mutual funds, it could be a nightmare,” a senior official at an asset management company said, on the condition of anonymity. “The cost of storage of the underlying silver will be very high and low levels of purity are big problems.”