Investors exit gold ETFs, withdraw Rs 775 cr in FY17

Investors remained bearish on gold exchange-traded funds (ETFs) as they pulled out Rs 775 crore from the instrument in the last fiscal, making it the fourth consecutive financial year of outflow.

Asset under management (AUM) of gold funds plunged by 16 per cent in the just concluded financial year.

Trading in gold ETF segment has been tepid during the last four financial years. It had witnessed an outflow of Rs 903 crore, Rs 1,475 crore and Rs 2,293 crore in 2015-16, 2014-15 and 2013-14, respectively.

However, the pace of outflow slowed in 2016-17 compared to the preceding three years as investors are focusing on investments in equity as an asset class, an expert said.

According to the latest data available with Association of Mutual Funds in India (Amfi), a net sum of Rs 775 crore was pulled out of 14 gold-linked ETFs in the past fiscal.

"Barring October, gold ETFs have seen net outflows for the whole of past fiscal. October saw net inflows propping up marginally on festival demand," FundsIndia.com Head of Mutual Fund Research Vidya Bala said.

The asset base of gold funds dropped to Rs 5,480 crore at the end of March 2017 from Rs 6,346 crore at the end of March 2016.

Gold ETFs are passive investment instruments that are based on gold prices and invest in gold bullion. There is a complete transparency on the holdings of an ETF because of its direct gold pricing.

The mutual fund sector has 14 gold-based schemes, which have been in the market since 2006-07.