Silver ETFs Frenzy: Premium Surge A 'Temporary Phenomenon', Says AMFI Chief Chalasani

The spike in the premium on Silver ETFs have been called a temporary problem by the AMFI Chief Executive, Venkat Chalasani. During the AMFI Concal, Chalsani said that the overvaluation is a “temporary phenomenon” driven by a “global shortage” of the metal, and that individual fund houses are managing the risk based on their own policies.

Chalasani’s comments provide context to the market shock that saw silver ETFs trading up to 18% above their Net Asset Value. He also added that this issue is not exclusive to India. Chalasani confirmed that the recent decision by one fund house to suspend fresh investments was specific to a “fund of funds and not ETFs” directly, and was an action taken based on their risk management policy.

He elaborated, “Each individual AMC has its own risk management policy. Individual AMCs will take a call. No collective decision has been taken yet.” He added that the shortage is a global shortage, and therefore, adding a premium on a global level.

The AMFI Chief also noted a key indicator of market stress which is the spike in silver prices.

“The spot price is higher than the futures in terms of silver,” which typically indicates immediate demand outstripping supply. These comments come amid a period of intense interest in the metal, with brokerages like Goldman Sachs commenting that metal prices may go up as central bankers are upping their holdings.

The strong investor appetite for silver is reflected in the record-breaking inflow data. Net inflows into Silver ETFs in September hit an all-time high of Rs 5,341.67 crore.

This surge pushed the total Assets Under Management of Silver ETFs to Rs 36,460.94 crore in September, significantly up from the Rs 26,292.34 crore recorded in August. The month of August saw inflows of Rs 1,759 crore.

Despite the record inflows, Chalasani’s guidance suggests that the market should be patient, as the high premium is a short-term distortion.