Groww Mutual Fund has launched an open-ended Exchange Traded Fund (ETF), namely the Groww Gold ETF that tracks the domestic price of physical gold. By investing in gold bullion (99.5 per cent purity), this ETF provides exposure to investors to the gold market without the hassles associated with buying, storing, or insuring physical gold.
NFO Details
The New Fund Offer (NFO) will run from October 7, 2024 to October 18, 2024. Investors can purchase small units of the ETF, each representing 0.01 grams of gold. The minimum investment is Rs 500, and there is no exit load involved in the scheme.
Advertisement
The ETF will closely mirror the price movements of gold, allowing investors to benefit from the performance of the metal, subject to tracking errors.
A growing interest in gold ETFs in India was seen after the recent customs duty reduction in the Union Budget that led to a 9 per cent decrease in gold prices in India, offering investors an opportunity to acquire gold with lower taxes. Further the safety, potential returns, and convenience offered by Gold ETFs add to their allure.
Notably, investments in gold ETFs surged to Rs 1,337.4 crore in July 2024, marking the highest monthly net inflows since February 2020. From May to July 2024, gold ETFs attracted significant inflows, totaling Rs 2,890.9 crore, the brokerage said in a release.
Advertisement
Gold ETF: Key Features
Gold as a Hedge: Gold has historically been viewed as a hedge against systemic risks, including financial crises and inflation. This feature is relevant in current geo-political climate. For example, during the 2008 global financial crisis, gold gave a positive return of 5.8 per cent while major stock indices like the S&P 500 and Nifty 50 fell. Similarly, during the COVID-19 pandemic, gold gave a return of 25.1 per cent.
Convenience: Investors can buy and sell ETF units on the stock exchange during market hours, providing potential liquidity and price transparency. Further they can be used as collateral for loans.
Hedge against currency depreciation: Gold provided 106.76 per cent returns in USD terms from 2014 to 2024, while the INR depreciated from Rs 61.54 to Rs 83.82 against the USD, the fund house said. This corresponds to a 181.62 per cent return in INR terms.
The gains from ETF will be taxed as Long-Term Capital Gains (LTCG) after a 12-month holding period, taxed at 12.5 per cent without indexation. Short-Term Capital Gains (STCG) will be taxed at the applicable income tax slab, of the investor.
