Global diversification is coming at a steep price for Indian investors, with several India-listed international ETFs trading at significant premiums to their indicative net asset values (iNAV). The premium has widened sharply over the past two sessions, raising concerns that investors could be paying far more than the underlying global assets are worth.
The Nasdaq 100 Top 50 ETF was trading at a 65% premium to its iNAV, while the S&P 500 Top 50 ETF was at a 46% premium. The NYSE FANG+ ETF was trading at a 34% premium, Hang Seng Tech ETF at 28%, and Nasdaq 100 ETF at 26%, according to data shared by Samco Securities.
What made the move notable is that much of the increase has come over Monday and Tuesday, said Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities. "US markets were closed on Monday for Labour Day, suggesting the sharp rise in Indian ETF prices is not simply a reflection of a corresponding move in the underlying US markets."
Sheth added that the move could largely be explained by a classic demand-supply mismatch. Since India's mutual fund industry has been constrained by overseas investment limits, it restricts the ability of fund houses to create additional units of international ETFs when demand rises.
Harshal Dassani, business head at INVasset PMS, echoed similar views. "When supply cannot respond to demand, the ETF itself becomes scarce and can trade materially above intrinsic value," he said.