The most recent data published by the Association of Mutual Funds in India (AMFI) suggests that gold exchange traded funds (ETFs) have lost their sheen among Indian investors.
The data published for the initial ten months of the current fiscal shows that INR 1,290 crores of money have been pulled out from gold ETFs during the ten-month period from April 2014 to January this year. Consequently, the total assets under management of gold funds have declined sharply by almost one-fifth during the ten-month period. The poor returns offered by these products are seen as the primary reason behind money managing mutual funds withdrawing such huge sums of money. The regulatory restrictions on import of gold into the country are also seen as another reason for the outflow.
The declining gold prices have resulted in negative returns from gold ETF products. It must be noted that this was at a time when equities gave spectacular returns for the investor over the past ten-month period. Much to the relief, the outflow from gold ETFs have dropped during recent months. The recent decision by RBI to ease restrictions on gold imports and the anticipated duty cut during budget are likely to trigger positive sentiments and attract investors back to gold.
The Indian mutual fund sector has 14 gold-backed schemes. The total assets held by all these schemes totaled INR 7,245 crores as at end-January this year. This is sharply lower when compared with the total holdings of nearly INR 9,000 crores at the end of January 2014.