Global ETFs: MAFANG, S&P 500 Top 50 trade at 20%+ premiums — What’s driving the surge?

As Indian investors increasingly look to diversify beyond domestic markets, international exchange-traded funds (ETFs) are witnessing strong demand — pushing several funds to trade at steep premiums over their indicative NAV (iNAV). The trend reflects both robust global market performance, particularly in US equities, and structural constraints on overseas investing.

What are Global ETFs?

Global or international ETFs are investment vehicles that allow investors to gain exposure to global markets by investing in companies listed outside their home country. Instead of purchasing individual foreign stocks such as Apple or Microsoft, investors can buy a single ETF that tracks a global index, thereby accessing multiple international companies in one transaction.

These ETFs function similarly to domestic ETFs, as they are traded on stock exchanges and aim to replicate the performance of a specific index. They invest in the same securities in similar proportions, making global diversification relatively simple and cost-effective.

Premiums reflect strong demand

Recent data shows that popular global ETFs are trading significantly above their underlying value. The Mirae Asset NYSE FANG+ ETF (MAFANG) is commanding a premium of 22.53%, with a market price of ₹179.76 versus an iNAV of ₹146.71. Similarly, the Mirae Asset S&P 500 Top 50 ETF is trading at a 21.07% premium, while the Motilal Oswal Nasdaq Q 50 ETF carries a 20.54% premium.

Other international ETFs also remain elevated. The Mirae Asset Hang Seng TECH ETF is trading at a 20.02% premium, while the Motilal Oswal Nasdaq 100 ETF (MON100) is priced at a 19.22% premium. Nippon India’s Hang Seng BeES ETF, though relatively lower, still trades at a 15.01% premium.

What is driving the premiums?

The primary driver is restricted supply. RBI limits under the Liberalised Remittance Scheme (LRS), along with caps on mutual fund overseas investments, have curtailed fresh inflows into international funds. As a result, ETFs have emerged as one of the few accessible routes for global exposure, leading to demand-supply imbalances and price premiums.

Performance and trend

Strong historical returns, particularly in US-focused indices, have further intensified demand. The Motilal Oswal Nasdaq Q 50 ETF has delivered 81.18% returns over the past year and 138.84% over three years. The Motilal Oswal Nasdaq 100 ETF has also posted gains of 73.08% in one year and 182.75% over three years.

The Mirae Asset NYSE FANG+ ETF stands out with a 3-year return of 271.36% and a 5-year return of 260.26%. Meanwhile, the Mirae Asset S&P 500 Top 50 ETF has delivered a 5-year return of 171.97%.

In contrast, Asia-focused ETFs show relatively moderate performance. The Hang Seng TECH ETF has delivered 10.81% over one year, while Nippon India Hang Seng BeES has gained 40.25%.

Investor takeaway

For Indian investors, international ETFs offer a valuable route to diversify portfolios and reduce domestic concentration risk. However, factors such as currency movements, tracking error, and high entry premiums can impact returns.

While global diversification remains compelling, investors should carefully assess valuations and risks before investing, especially when ETFs are trading significantly above their intrinsic value.