SILVER prices surged $50 mark on October 10, driven by strong demand during this Diwali festive season and domestic prices touching Rs 1.71 lakh per kilogram. This rally has attracted many new investors to silver exchange-traded funds (ETFs), even though these ETFs are trading at significant premiums over their NAVs.
Understanding the Premium in Silver ETFs
Some of the top silver ETFs on NSE, including SBI Silver, HDFC Silver, and Axis Silver moved up from 9–13% as of October 9, trading above their indicative NAVs.
This situation shows fear of missing out (FOMO) buying, with investors rushing into silver ETFs in spite of signs of short-term overheating in the spot market. Once physical silver supply squeezes through sharp price rallies, ETFs frequently trade at premiums due to temporary imbalance between demand and supply, not essentially long-term overvaluation.
Also Read: SS Rajamouli’s 52nd Birthday: Bollywood Unites To Celebrate The Genius Behind Baahubali And RRR
What Investors Should Consider
Replying to the increasing premiums, Kotak Mutual Fund temporarily put off lump-sum investments in its Kotak Silver ETF Fund of Fund on October 9. The objective of this move is to protect investors from incompetent pricing at existing premium levels. SIPs and redemptions will continue, and the fund will renew for lump-sum investments when premiums stabilize.
Kotak AMC continues a positive long-term outlook on silver, mentioning its importance in the global energy transition and as a hedge for market volatility.
Experts, therefore, advise investors to wait for premiums to ease or NAVs to realign before making an investment entry. Despite the fact that silver’s continuing fundamentals remain strong, timing entry is crucial in order to avoid overpaying.
Ankur Mishra is a journalist who covers an extensive range of news, from business, stock markets, IPOs to geopolitics, world affairs, international crises, and general news. With over a decade of experience in the business domain, Ankur has been associated with some of the reputed media brands. Through a sharp eye on global marketplaces along with deep insights and analysis of business strategies, Ankur brings simplicity to the complex economic matrix to decode market trends and empower people.
He is committed to entrenched data, facts, research, solutions, and a dedication to value-based journalism. He has covered trade tariff wars, international alliances, corporate policies, government initiatives, regulatory developments, along with micro- and macroeconomic shifts impacting global fiscal dynamics.
