Retail Investors Betting Big On Silver ETFs, AUM Grows Four-Fold In One Year

Silver, often considered ‘the younger sibling’ of gold is gaining the limelight - courtesy of the growing popularity of Silver-Exchange Traded Funds (ETFs). According to a recent report by ICRA Analytics, Silver ETFs have witnessed remarkable growth wherein the Assets under Management (AUM) rose by over four-fold in the last year. Silver ETFs touched Rs 12,331 crore in October 2024 growing from Rs 2844.76 crore in October 2023. Ahead of Dhanteras this year, silver sales spiked sharply. But it was not just traditional buyers opting for silver coins, bars, or jewellery, rather the data shows retail investors are increasingly drawn to silver in the form of ETFs.

Net inflows in Silver ETFs surged notably wherein Rs 643.10 crore was invested in October 2024 alone, a visible uptick from Rs 518 crore during the same month last year.

Why the Shift to Silver ETFs?

Silver ETFs have managed to garner the attention of Indian investors within a short period. Just like gold, the rise of silver ETFs is not just a fluke. Says Ashwin Kumar, Senior Vice President at ICRA Analytics, “It is being increasingly preferred over physical form as investing in physical silver is challenging due to storage-related issues.”

In addition to storage issues, Kumar notes that buying physical silver may incur GST costs which unregistered dealers may have to pay out of pocket. On the other hand, investing in silver ETFs is relatively easy as they provide better liquidity compared to physical options.

“Silver ETFs are listed on the exchange thereby allowing investors to buy and sell units easily,” Kumar notes.

Another reason behind growing investor participation is the factor of attractive returns. Silver ETFs have given returns that outpaced those of their golden counterparts over the past year. Where gold ETFs delivered around 28.07 per cent return over the 1 year, silver ETFs gave an impressive average return of 32.49 per cent.

For shorter durations, this is how ETFs performed:

1) 1-month returns for silver ETFs stood at 7.57 per cent as compared to gold’s 5.32 per cent

2) 6-month returns showed silver edging ahead with 20.25 per cent, while gold recorded 19.29 per cent

Among the standout performers, the UTI Silver Exchange Traded Fund led the pack, delivering around 33.13 per cent return over one year.

Factors Fueling This Popularity

Several factors would further fuel this silver rush Kuamr states. He notes the following reasons that will impact its growth;

- Economic uncertainty is one of the leading factors contributing to investors choosing Silver ETFs. As global instability and growing inflation continue to trouble investors, they move towards such safe-haven assets.

- Additionally, it is also being considered for portfolio diversification. Investors see it as complementing their gold investments and a hedge against inflation.

- Demand for silver is also expected to remain upbeat due to its usage in electronics and green technologies

- Moreover, cuts in customs duty and changes in taxation structure have made silver investment more attractive

“Silver prices are expected to remain attractive as the expectation is that the U.S. Federal Reserve will continue to cut interest rates in the coming months giving a boost to silver prices,” Kumar states. For retail investors, silver ETFs are becoming more than just another option - they are emerging as potentially versatile and high-performing assets.