Gold ETF inflows climb four-fold to Rs 6,919 crore in FY21

Investors infused over Rs 6,900 crore in gold exchange-traded funds (ETFs) in 2020-21. That is four times the amount that was infused in the preceding fiscal. This increase has been spurred by heightened risk and uncertainty sparked by the COVID-19 pandemic. This also marks the second consecutive year of inflow. Before that, gold ETFs were witnessing outflows since 2013-14, as shown in data from Association of Mutual Funds in India (AMFI).

As per AMFI, investors put in Rs 6,919 crore in 14 gold-linked ETFs, much higher than Rs 1,614 crore invested in 2019-20. Prior to that, gold ETFs witnessed outflows of Rs 412 crore in 2018-19, Rs 835 crore in 2017-18, Rs 775 crore in 2016-17, Rs 903 crore in 2015-16, Rs 1,475 crore in 2014-15 and Rs 2,293 crore in 2013-14. The segment had witnessed an infusion of Rs 1,414 crore in 2012-13. This trend was because retail investors poured in more money into equities as compared to gold ETFs, mainly on account of decent returns.

Mywealthgrowth.com co-founder Harshad Chetanwala said a similar surge in the ongoing fiscal is unlikely. Quantum Mutual Fund Senior Fund Manager (Alternative Investment) Chirag Mehta said that during and after a crisis, investors tend to appreciate the risk reducing, return enhancing role of gold, and 2020 was a similar case. Moreover, investors were unable to invest in physical gold amid the pandemic lockdown, resulting in additional inflows to gold ETFs.

"Gold prices usually surge during such global events and many investors invested in gold last year when they started seeing the gold prices increasing," Chetanwala said.

Vijay L Bhambwani, head of research, Behavioural Technical Analysis at Equitymaster, said investors are sensing a weak rupee and hedging against it by buying gold.

Morningstar India Director (Manager Research) Kaustubh Belapurkar said gold ETFs continue to receive steady inflows from investors in this fiscal as investors are steadily acknowledging the need for adding gold as a diversifier in portfolios. "Gold functions as a strategic asset in an investor's portfolio, given its ability to act as an effective diversifier, and alleviate losses during tough market conditions and economic downturns.This is where it draws its safe-haven appeal," he added.

Chetanwala said that unlike last year, this year we know how to take care of a situation like COVID-19. "Hence, it is quite unlikely that inflows in gold would see a similar surge this year," he added.

(With PTI inputs)

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