Bullion ETFs Dominate Broker Margin Funding Books
In a significant shift reflecting changing investor sentiment, gold and silver exchange-traded funds (ETFs) have surged to become among the top five picks financed by brokers under the margin trade funding (MTF) facility on the National Stock Exchange (NSE). This trend highlights a growing appetite for portfolio diversification as equity markets remain rangebound and external geopolitical uncertainties persist.
Top Picks and Funding Figures
According to the latest NSE data, Nippon India's GoldBees, which ranked seventh as of 1 February, has now climbed to the third position in brokers' MTF books as of 9 February. Meanwhile, the popular SilverBees, or Nippon India Silver ETF, which held the top spot earlier, has moved to the fifth position. GoldBees was third only to Hindustan Aeronautics Ltd (HAL) and Jio Financial Services, which occupied the top two slots.
Broker funding for GoldBees stood at ₹1,246 crore, while SilverBees received ₹1,201 crore as of 9 February. HAL led with ₹1,620 crore, followed by Jio Financial Services at ₹1,303 crore. ITC ranked fourth with funding of ₹1,213 crore.
How Margin Trade Funding Works for Bullion
Margin trade funding allows investors to pay only a portion of the value of a stock or ETF, with the broker financing the remaining amount. Ashish Nanda, chief business digital officer at Kotak Securities, explained that margins for gold and silver currently require clients to pay 30-40%, depending on the broker. This implies leverage of approximately two-and-a-half to three times.
"To purchase ₹1 crore worth of a gold ETF, an investor would need to invest ₹30 lakh, while the broker finances the balance in exchange for interest ranging from 9% to 18% per annum," Nanda added.
Expert Insights on Diversification and Allocation
Personal finance expert Amol Joshi, founder of PlanRupee Investment Services, emphasized that diversification aims to achieve risk-adjusted returns. He recommends allocating 10-15% of a portfolio to precious metals, with gold comprising two-thirds and silver the remainder.
"Investors have increased their allocation to precious metals from a historical 5% to 10-15% over the past year due to the phenomenal returns relative to equities. We expect gold to outperform silver in the long term," Joshi stated.
Performance Metrics and Recent Volatility
GoldBees delivered absolute returns of 79% over the past year, reaching ₹128.7 per unit as of 11 February. In contrast, the Nifty 50 rose 12.5% to 25,953.85 points during the same period. SilverBees posted an impressive 171% return at ₹247.37 per unit, but its higher volatility has recently impacted investors.
As of 11 February, SilverBees was down 31% from its record high of ₹360 on 29 January, while GoldBees declined 13% from its peak of ₹148.14. Both metals have cooled from their highs due to easing tensions between Iran and the US and a stronger US dollar.
Market Context and Broader Trends
India had 25 gold ETFs and 17 silver ETFs as of January end, according to the Association of Mutual Funds in India. The rise in margin trade funding for bullion coincides with record net inflows of ₹33,503 crore into gold and silver ETFs in January, surpassing equity mutual fund inflows of ₹24,028.59 crore. Gold ETFs accounted for ₹24,039.96 crore of this total, with silver making up the remainder.
This surge underscores a strategic pivot among investors seeking stability and growth through precious metals in an unpredictable market environment.
