The sharp gap between the trading price of silver exchange-traded funds (ETFs) and the actual price of silver could expose a liquidity problem in one of India's most popular investments this year, according to Deepak Shenoy, founder of Capitalmind.
The gap between the ETF market price and the metal's value has raised questions about pricing and supply in the silver market.
Posting on X (formerly Twitter), Shenoy commented after the Nippon India Silver ETF (Silver BeES) jumped almost 9% in an hour. The post followed an earlier update by market analyst Kirtan A Shah, who noted that the ETF's net asset value (NAV) hit Rs 165 even as silver futures on the commodity exchange were falling.
“Silver is apparently tough to source. The market maker of the silver ETF usually buys physical silver and exchanges it with the asset management company for ETF units to sell in the market. With low physical silver available, a market maker isn't able to do this, so there are not enough sellers in the market,” Shenoy wrote.
He added, “This means the ETF trades much higher than it should. Be careful. Such demand–supply imbalances don't last long.”
Silver is apparently tough to source. The market maker of the silver etf usually buys silver in physical form, and exchanges that with the AMC for etf units, to sell units in the market.
October 9, 2025
With low physical silver available, a market maker isn't able to do this, so there are not… https://t.co/NNStRPJBdwWhile Silver BeES rose over 9%, MCX Silver December futures — the main benchmark for silver — slipped 0.75% to Rs 1,48,738 per kg.
The premium above NAV appears when an ETF's price is set by trading demand rather than by the underlying asset's value. Strong buying interest, often driven by recent performance, can push ETF prices well beyond the worth of the silver they represent.
The rally came a day after silver futures hit a record Rs 1,49,855 per kg, briefly crossing Rs 1.5 lakh, marking a 2.79% gain.
Silver prices have risen nearly 90% so far in 2025, lifted by demand from solar and electronics manufacturing and a tight global supply.
Separately, Kotak Mutual Fund has paused new lump-sum and switch-in investments in its Kotak Silver ETF Fund of Fund. The fund house said the move was due to the “high spot premium for silver over the import parity price,” noting that domestic silver is trading at a premium because of limited physical supply.
Kotak said the shortage may continue until the end of October 2025. Existing systematic investment plans and redemptions remain open, but the suspension points to rising pressure on silver market liquidity.
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