India's gold imports stand at zero, but its banks foresee strong growth in paper ETFs...
INDIA'S LARGEST PUBLIC-SECTOR BANK, State of Bank of India (SBI), today launched a new gold exchanged traded fund with an ambitious plan to collect at least 1.5 billion Rupees ($29.7 million) of investments in the first instance, reports Commodity Online from Mumbai.
The Gold ETF from the Mutual Fund division of SBI is the sixth exchange traded fund in the yellow metal to hit the Indian markets. Banks and financial institutions are getting ready to launch new gold-related schemes just as India – the largest retail market for Gold Bullion in the world – suffers a severe drop in consumer demand thanks to record-high prices and the ongoing economic problems.
Gold imports to India have fallen to zero each month in 2009 so far. SBI officials said on Monday that the Gold ETF will be open for subscription until April 28th.
The fund will be then listed on India's National Stock Exchange, and R.S.Srinivas Jain, senior vice president and chief marketing officer of SBI Mutual, said that the bank is bullish on the growth of Gold ETFs in India.
"We feel that India has a great potential for more Gold ETFs. We are planning to raise good money through the exchange traded fund in gold."
He said the fund house – a joint venture between State Bank of India and France's Societe Generale Asset Management – plans to market the scheme through the state-owned bank's branches.
The SBI Gold ETF will be benchmarked against the London AM Gold Fix, and the gold used to "back" the value of each share in the trust fund will be imported by Bank of Nova Scotia on behalf of SBI Mutual.
In line with the rise in Indian Rupee Gold Prices, returns on India's five existing Gold ETFs reached 6% during the month as the yellow metal touched a new high.
Launched in 2007, Gold ETFs in India are managed by five fund houses – Benchmark Asset Management, UTI Mutual Fund, Kotak Mahindra Mutual Fund, Reliance Capital Asset Management and Quantum Mutual Fund.
But although these ETFs are growing in size year on year, they remain negligible when compared to India's previous annual imports of around 700 tonnes.
In India Gold Prices rose roughly 40% over the past year. Going forward, returns for Gold ETF investors will depend not only how global gold prices fare, but also on the direction of the Rupee against the Dollar.