The latest inflow comes amid a sell-off in broader market and sharp plunge in international crude oil prices.
Gold exchange-traded funds witnessed an all-time high net inflow of Rs 1,483 crore in February, as slowdown in global economy amid the coronavirus outbreak led investors to opt for the instrument as a safe haven. This also marks the fourth consecutive monthly net inflow in gold ETFs.
The latest inflow comes amid a sell-off in broader market and sharp plunge in international crude oil prices. According to the latest data available with the Association of Mutual Funds in India (Amfi), a net sum of Rs 1,483 crore was pumped in into gold-linked ETFs in February as compared with the 7-year high of Rs 202 crore in the preceding month.
Prior to that, the safe-haven asset saw an infusion of Rs 27 crore in December and Rs 7.68 crore in November. However, it had seen a net pull-out of Rs 31.45 crore in October. In September 2011, Gold ETFs had attracted a total investment of Rs 988 crore.
“With global economy staring at a major slowdown as coronavirus epidemic tightening its grip across the globe, gold has emerged as the go-to asset class as it regains its safe-haven appeal. Consequently, the gold ETF category received a staggering net inflow in February,” said Himanshu Srivastava, senior research analyst (manager research), Morningstar Investment Adviser India.
Alok Agarwala, head (research and advisory) at Bajaj Capital, said, “During turbulent times, gold is considered a safe haven and a store of value for the investors. The equity market mayhem is discernible caused by the coronavirus pandemic.” Moreover, heightened geo-political risks such as US-China decoupling and tensions in the Middle East and North Korea point towards a precarious recovery in global growth, he said.
Apart from global risks, sagging domestic growth, low interest rates, higher import duty and depreciation of rupee against the US dollar also prompted investors to opt for gold as a safe haven, he added. Experts said investors who always want liquidity, gold ETFs are a better bet. Besides, prices of such instruments are similar irrespective of the geographical location. In the case of physical gold, prices vary from city to city and jeweller to jeweller.
The inflows meant asset under management (AUM) of gold funds surged to Rs 7,926 crore at the end of February from Rs 6,207 crore at the end of January. Gold-backed ETFs are passive investment instruments that are based on price movements and investments in physical gold.
Overall, mutual fund houses witnessed an outflow of Rs 1,985 crore across all segments as compared to an inflow of Rs 1.2 lakh crore in January. The outflow led to an AUM of the 44-player industry dropping to Rs 27.23 lakh crore by the end of February from Rs 27.86 lakh crore at the end of January.