Thanks to the restriction imposed on mutual fund houses for accepting fresh inflow into overseas exchange traded funds (ETFs), the gap between the trading price of units at stock markets and fund houses is getting wider.
For the unversed, mutual fund ETFs are available for trading at the stock market as well, and this is why they are named as ‘exchange traded funds’.
The price at which these units are sold at a stock exchange can be different from the one at which they are traded at a mutual fund house. The price at which these units are sold at a fund house is known as the net asset value, or NAV.
This price differential (between NSE’s trading price and NAV) is now getting wider because their purchase is not permitted at a fund house anymore, while their units are still being sold at the stock exchanges.
ALSO READ: Sebi asks funds investing in overseas ETFs to stop taking fresh money from April
Notably, fund houses are not supposed to accept fresh money for ETFs listed on foreign exchanges from April 1 onwards, according to the Sebi’s order issued in March.
Why were they barred?
Mutual fund houses were barred from accepting fresh money to invest into these units because 95 percent of the $1 billion limit set by the RBI for overseas exchange traded funds (ETFs) was breached, the AMFI data revealed.
The capital markets regulator Sebi has communicated the rule for ETF feeder funds to Amfi, which has informed the mutual fund houses.
However, some international funds are still open for investment, and one can get the list here.
| Overseas ETF | NAV (Rs) | NSE (LTP) (Rs) |
| Mirae Asset NYSE FANG + ETF | 81.38 | 95.41 |
| Mirae Asset HANG Seng Tech ETF | 13.18 | 12.84 |
| Mirae Asset S&P 500 Top 50 ETF | 38.447 | 43.2 |
| Nippon India ETF Hang Seng BeES | 260.68 | 267.12 |
| Motilal Oswal NASDAQ Q 50 ETF | 59.58 | 62.34 |
| Motilal Oswal Nasdaq 100 ETF | 144.19 | 144 |
(Source: Portals of fund houses, NSE; NAVs on April 26)
As one can see in the table above, NAV of Mirae Asset NYSE FANG + ETF is ₹81.38 while the same ETF’s last trading price at NSE was ₹95.41.
ALSO READ: Why Mirae Asset MF is cautioning its ETF investors?
Similar differential in the ETF units of Nippon India ETF Hang Seng BeES is ₹6.44, in case of Motilal Oswal NASDAQ Q 50 ETF, the difference is ₹2.76; and in case of Motilal Oswal Nasdaq 100 ETF, the difference is marginal and stands at ₹0.19 per unit.
It is important to recall here that Mirae Asset Mutual Fund recently advised retail investors to be cautious of investing in overseas ETFs through the stock market because of this difference in trading price at exchanges.
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