'Gold, Silver ETF NAV returns for all ETFs will now be closer to each other': Niranjan Avasthi on SEBI’s shift to MCX spot pricing

Mutual funds will be required to value physical gold and silver using the polled spot prices published by recognised domestic stock exchanges, instead of relying primarily on London Bullion Market Association (LBMA) benchmark prices. The new framework, notified by the Securities and Exchange Board of India (SEBI), will come into effect from April 1, 2026. The move marks a significant shift in how gold and silver Exchange Traded Funds (ETFs) determine their Net Asset Values (NAVs), aligning valuation practices more closely with domestic market conditions.

Niranjan Avasthi, Senior VP at Edelweiss Mutual Fund, said that the earlier methodology sometimes resulted in valuation divergence.

“Till date, ETFs used London Bullion Market Association (LBMA) gold and silver prices converted into domestic prices after adjusting for currency and import duties. These often differed from actual Indian market prices due to local premiums or discounts. Some ETFs used to account for this difference, some didn’t. Now, valuation of underlying gold and silver in ETFs will be based on the polled spot price published by a recognised domestic exchange, currently provided by the Multi Commodity Exchange of India (MCX) and some others. This will ensure uniform valuation across ETFs and aligns pricing more closely with actual domestic market prices. This is a strong step towards greater accuracy. ETF NAV returns for all ETFs will now be closer to each other, subject to tracking difference,” said Avasthi.

Why SEBI changed

Under the previous system, physical gold and silver held by ETFs were valued at LBMA AM fixing prices. These international benchmarks were converted into rupee terms after factoring in currency conversion, customs duties, transportation costs, taxes and other levies. Fund houses could also account for notional premiums or discounts to reflect domestic demand-supply conditions.

However, because adjustments were not always applied uniformly across asset management companies, similar ETFs could report minor variations in NAVs despite holding comparable underlying assets.

SEBI’s revised circular now allows valuation based on pooled spot prices published by recognised stock exchanges that are used for settlement of physically delivered gold and silver derivatives contracts. Currently, the Multi Commodity Exchange of India (MCX) is among the exchanges providing such polled spot prices.

The regulator has also clarified that the spot polling mechanism must comply with SEBI guidelines from time to time. Further, the Association of Mutual Funds in India (AMFI), in consultation with SEBI, will prescribe a uniform policy to ensure consistent valuation practices across fund houses.

What it means for investors

The transition to domestic exchange-polled spot prices is expected to enhance transparency and reduce valuation inconsistencies across gold and silver ETFs.

By anchoring NAV calculations to Indian market prices rather than overseas benchmarks adjusted for imports, ETF pricing will better reflect domestic supply-demand dynamics. This is likely to result in tighter NAV convergence across similar ETFs, improving comparability for investors.

While tracking difference — the variation between ETF returns and underlying asset performance — will continue due to expense ratios and operational factors, dispersion arising from pricing methodology is expected to narrow significantly.

ETF market integrity

The revised framework comes at a time when gold and silver ETFs are gaining traction among retail and institutional investors seeking efficient exposure to precious metals without physical storage risks.

By aligning valuation practices with domestic market realities and enforcing uniform standards, SEBI’s move marks a structural reform in India’s ETF ecosystem. The new rules under the SEBI (Mutual Funds) Regulations, 2026 are expected to enhance pricing accuracy, improve investor confidence, and strengthen the integrity of precious metals ETFs in the domestic market.

Effective April 1, 2026, the revised rules under the SEBI (Mutual Funds) Regulations, 2026 are expected to improve pricing accuracy, standardise valuation practices, and reinforce investor confidence in India’s growing ETF ecosystem.