SEBI Mandates Domestic Spot Pricing for Gold, Silver ETFs to Sharpen NAV Accuracy

India’s capital markets regulator Securities and Exchange Board of India (SEBI) has overhauled mutual fund valuation norms, mandating that gold and silver ETFs be priced using domestic spot rates instead of international benchmarks. Previously, ETFs relied on London Bullion Market Association (LBMA) prices converted into rupees after adjusting for currency movements and import duties. Going forward, fund houses must use the polled domestic spot price published by a recognised Indian exchange, currently the Multi Commodity Exchange of India (MCX), ensuring valuations better reflect prevailing Indian market conditions.

Experts say the shift will improve accuracy and consistency in net asset value (NAV) calculations. Under the earlier framework, variations in adjusting international prices for local premiums, discounts and logistics costs led to inconsistencies across ETFs. Anchoring valuations to MCX spot prices is expected to narrow return dispersion caused purely by methodology, reduce arbitrage inefficiencies, and enhance transparency. Market participants believe NAV movements across gold and silver ETFs will now align more closely, barring tracking differences and expense ratios.

Beyond valuation reform, SEBI has also allowed equity schemes to allocate a limited portion to gold and silver, hybrid funds to invest in precious metal ETFs, and lifecycle funds to hold up to 10% in gold and silver ETFs or commodity derivatives. Experts say these changes expand diversification options and strengthen gold and silver’s role as hedges against volatility, inflation and currency risks. However, analysts underline that the move to standardised domestic pricing forms the cornerstone of the reform, reinforcing investor confidence in precious metal–linked mutual fund products.

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