BSE warns investors against buying international ETFs at inflated prices
Mumbai, September 25
BSE has cautioned investors against buying international exchange-traded funds at inflated prices, warning that their market prices could fall suddenly even if the value of the underlying overseas securities remains stable.
The exchange said units of some international ETFs were trading at a substantial premium to their net asset value (NAV). NAV is the actual per-unit value of the assets held by an ETF. A premium means investors are paying more for an ETF unit than the value of the assets backing it.
"It has been observed that units of certain Exchange Traded Funds (ETFs), particularly those investing in overseas securities ('international ETFs') are trading at a substantial premium to their Net Asset Value (NAV), even though the NAVs of the underlying scheme of these ETFs have remained broadly stable," BSE said in its notice.
BSE said the overseas investment limits available to mutual funds had been fully utilised. As a result, mutual funds are restricted from creating new units of international ETFs.
The limited supply of units can push their market prices significantly above the value of the underlying assets.
BSE warned that investors purchasing such units at steep premiums face the risk of an abrupt price fall unrelated to movements in overseas markets.
The exchange said prices could correct sharply if overseas investment limits are increased. A correction could also occur when the base price used to determine ETF price bands shifts to the previous day's NAV from April 1, 2027.
The change is part of the ETF trading framework issued by the Securities and Exchange Board of India on June 15, 2026. Provisions relating to base prices, price bands, pre-open call auctions and close-out procedures came into effect on September 7.
"In view of the above, all investors/market participants are advised to exercise extreme caution and perform due diligence," BSE said.
It advised investors to check the NAV available on the stock exchange or Association of Mutual Funds in India website, or their trading application or terminal, before placing orders in international ETFs.
— ANI
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