Sebi’s ETF Proposals Aim To Fix Pricing Lags And Safeguard Investors

Sebi has released a consultation paper highlighting inefficiencies in ETF pricing, particularly the T-2 NAV lag that causes discrepancies between ETF prices and their underlying assets. This issue has been most visible in gold and silver ETFs, where extreme volatility exposes retail investors to unfair pricing gaps.  

To tackle this, Sebi has proposed shifting to more current valuation references and replacing the existing fixed ±20% price band with flexible bands that better reflect market conditions. The move is designed to align ETF pricing mechanisms with those of individual stocks, ensuring smoother price discovery and reducing risks of mispricing.  

Analysts believe these reforms will enhance transparency, improve liquidity, and protect retail investors who increasingly rely on ETFs for diversified exposure. The proposals also signal Sebi’s intent to modernize India’s ETF ecosystem, making it more resilient to global market fluctuations.  

Key Highlights  

• Sebi flags T-2 NAV lag in ETF pricing  
• Proposes flexible price bands instead of fixed ±20%  
• Focus on gold and silver ETFs amid volatility  
• Aims to align ETF pricing with stock market mechanisms  
• Designed to protect retail investors and improve transparency  

Sources: Tax Guru, Outlook Money, Sebi Consultation Paper