NSE flags risks as international ETFs trade at steep premiums
According to the exchange, prices of some ETFs that invest in overseas securities have surged even though the net asset values (NAVs) of their underlying holdings have stayed broadly stable
Publicly available market data shows the premiums widening sharply in recent weeks, with some ETFs trading roughly 65% to 80% above their NAVs at various points in September.
The National Stock Exchange (NSE) on Wednesday cautioned investors about the growing risks of buying international exchange traded funds (ETFs), several of which are trading well above the value of their underlying holdings.
According to the exchange, prices of some ETFs that invest in overseas securities have surged even though the net asset values (NAVs) of their underlying holdings have stayed broadly stable. In effect, investors are paying inflated prices for these units. Publicly available market data shows the premiums widening sharply in recent weeks, with some ETFs trading roughly 65% to 80% above their NAVs at various points in September.
NSE attributed the gap to supply constraints and regulatory changes. Indian mutual funds have exhausted their regulatory limits for overseas investment, which has restricted the creation of fresh ETF units even as demand keeps rising. Separately, new rules linking ETF price bands to the previous day’s NAV, effective April 1, 2027, could change how these products trade relative to their underlying assets.
Investors buying at such steep premiums risk an abrupt fall in prices that has nothing to do with movements in the underlying securities, the exchange warned, urging caution.
The appetite for overseas exposure shows no sign of slowing. AMFI data shows assets in mutual fund schemes investing abroad rose nearly 55% year-on-year to about ₹48,500 crore in August 2026, while investor folios grew more than 40%. Much of this is driven by the performance gap between Indian and global markets: over the past year, the Nifty 50 has fallen about 8% and the Sensex about 9%, while the Nasdaq-100 has gained roughly 24%.
With Reuters inputs