Gold exchange-traded funds are gradually losing lustre with the equity markets showing signs of recovery.
There has been a sharp decline in the number of units traded as well as the turnover in most of the National Stock Exchange-listed gold ETFs between February and April this year.
For example, the total traded quantity of the Gold BeES ETF, launched by Benchmark Mutual Fund, declined from 68,9344 units in February to 47,9331 in March, and 30,4007 in April.
In tandem, the total turnover for the ETF also declined from Rs 10,214 lakh (Rs 1.02 billion) in February to Rs 4,373 lakh (Rs 437.3 million) in April.
For UTI Gold EFF also, the total gold quantity traded in April came down to 71,861 units from 16,2782 units in February.
Fund houses are now looking at alternative avenues such as gold funds for more retail participation.
"We are looking at a new fund under the gold category, which will enable small investors to subscribe to the units from the offices of UTI, without even having a demat account," said sources at UTI Mutual Fund.
The collections of Reliance Gold ETF also declined from 16,6307 units in February to 62,308 in last month. The turnover of the ETF declined from Rs 2,380 lakh (Rs 238 million) to Rs 872 lakh (Rs 8.72 million) in same the time period.
In Kotak Gold ETF, the number of units traded in February was 57,595, which came down to 22,729 in April.
"With the equity markets rising by almost 30 per cent between mid-March and April, investors are no longer interested in gold ETFs. Also most Indians prefer holding physical gold, rather than gold ETFs," said a broker.
Recently, the State Bank of India launched a gold ETF, and hoped to raise about Rs 200 crore (Rs 2 billion) from the scheme.
"We have several ideas in the offing for penetrating gold ETF in the retail segment. The investment in ETF should be on an ongoing basis, and not only during the NFO," said Srinivas Jain, chief marketing officer, SBI Mutual Fund.
According to R Venkataraman, director, India Infoline, "Gold ETFs are good investment option in the long run. The fall in volume in the gold ETFs is due to fall in gold prices itself."
At present, the total assets under management of gold ETFs are close to Rs 700 crore (Rs 7 billion). Gold holding in ETF in February was close to 1,400 tonnes. Current private holdings of physical gold is about 13,000 tonnes, held in form of jewellery and medallions and bars in bank lockers.