Gold ETFs see surge in inflows in September quarter, more than 10x YoY growth: ICRA

This trend is despite physical gold becoming more tax-efficient since April 1.

Net inflows into Gold Exchange-Traded Funds (ETFs) have gone up dramatically this September quarter, versus a quarter ago and a year ago, according to ICRA Analytics.

It has gone up by more than 450 percent quarter-on-quarter (QoQ) and more than 10x year-on-year (YoY).

This is despite physical gold becoming more tax-efficient since April 1, when funds such as ETFs with lesser exposure to Indian equities began being taxed at the income-tax rate, irrespective of the holding period. Physical gold is still taxed at 20 percent, if the investor holds it for more than three years, and it comes with indexation benefits.

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According to data available on the AMFI (Association of Mutual Funds in India) website, gold ETFs witnessed net inflows to the tune of around Rs 1,660 crore during July-September 2023 period, as against net outflows of close to Rs 165 crore during July-September 2022. The net inflows have increased by nearly 457 per cent from Rs 298 crore registered during April-June 2023 period, noted ICRA’s report.

The report stated that physical gold has more tax benefits but “it is important to note that buying physical gold comes with its fair share of risk including storage, theft and impurities thereby impacting the returns”.

The analysts found that the one-year returns of these ETFs were over 20 percent. They have considered only 11 of the 13 gold ETFs because the other two hadn’t completed a year.

Also read: Thematic ETFs: Low on liquidity but worth a look

Ashwini Kumar, Head Market Data, ICRA Analytics, stated, “A quick analysis of the returns generated by the other gold ETFs suggests that the average 1-year returns across most of these funds range from around 20.6 percent to 22.46 percent while the 5-year CAGR returns across most of these funds range from around 12.84 percent to 13.32 percent”.