International-Focused ETFs Trade at Premium Over NAV Amid Surging Demand

Indian international-oriented ETFs are already trading at humongous premia to their Net Asset Value (NAV) due to the high demand by investors and due to regulatory caps. The Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) impose caps on foreign investment through mutual funds, a $7 billion for overseas equities and a $1 billion sub-cap for international ETFs. These levels were reached in 2022, halting production of new units and leading to a shortage as demand keeps on increasing.

 

Therefore, ETF prices have increased substantially higher than their NAVs—at points by over 15%—temporarily, reducing potential gains and exposing investors to loss of capital if the prices turn. Investors are advised to track the indicative NAV (iNAV) and put limit orders in order to avoid paying too much. The situation underscores the need for regulatory control in order to match investor access with market stability.

 

Source: Economic Times