These days, there is a huge craze for investing in global stocks and global ETFs in India, but due to this craze, a risk has arisen about which very few investors are aware. Most global mutual funds have stopped accepting new investments after regulatory limits on foreign investment were imposed. Along with this, global ETFs listed on Indian exchanges are also not able to create new units. The situation is that demand is increasing, but supply is stagnant — and as a result, the prices of these ETFs have gone up by 8% to 21% above their intrinsic NAV. Example: Motilal Oswal NASDAQ 100 ETF – 8% PREMIUM Mirae Asset S&P 500 Top 50 ETF – 21% PREMIUM Nippon Hang Seng BeES – 19% premium This premium does not last forever. The ETF’s price returns to around NAV over time. If you buy by paying a premium, your returns may decline or even lead to outright loss. FoF investors are also being affected by this as wrong ETF pricing is distorting their NAV as well. In this video we will understand how this premium is created, why it falls and why it is important to be cautious with global investments right now.
