The age-old obsession the common Indian folk has for the yellow metal Rs is well documented, but even the country’s companies seem to be going for gold — literally.
While holding data of physical gold by corporate investors is not in public domain, they clearly hold a lion’s share of paper gold traded on the exchanges. According to the latest figures provided by Association of Mutual Funds in India (Amfi), at Rs 4,176 crore, companies account for a little over half of total assets under management in gold exchange traded funds (ETFs). This is nearly three times their gold ETF holding in March.
At the end of March, companies accounted for 32.7 per cent of the gold ETF market, with an exposure of Rs 1,439 crore. Corporate investors now hold 51 per cent share of the total gold ETF AUM (assets under management) of Rs 8,185 crore. This is the highest companies have held since the instrument was introduced four years ago. Historically, the share of companies has hovered around the 30 per cent mark.
The gold rush by the corporate sector seems to have gathered steam in recent months as the metal has caught the fancy of investors fleeing for safety from risky assets, according to experts. Says Dhirendra Kumar, chief executive officer, Value Research: “The volatility of equity markets and the global uncertainty are leading investors to put money into gold ETFs. After all, gold, as an asset class, is considered a safe haven asset.” While a part of the rise in the assets is due to new inflows, some of it has come from rising prices of the underlying asset, he adds.
Spot gold prices ended at Rs 28,965 on Thursday, up 41 per cent year to date.
Thus, gold has easily been the best performing-asset class this year. Now, with the rupee downhill, its prices are likely to move up further from here, fund managers say. Sundeep Sikka, CEO, Reliance Mutual fund, notes companies and high networth investors (HNIs) are using gold ETFs as a hedge against uncertainties.
"This is also a reason why the AUM has risen."
According to Naveen Mathur, associate director- commodities at Angel Broking, companies have little option. "With the currency markets so volatile, equity markets are not looking too positive," he says. "Speculating on futures is fraught with risk. They have no option, but to invest in gold."
The number of corporate investor accounts, as denoted by folios, has also gone up 70 per cent in the past one year, to 5,599. While this indicates entry of new companies, not all of these would be big listed firms, point out managers. "The corporate segment in the gold ETF AUM data need not necessarily mean large companies all the time," notes one. "Many are private limited companies, owned by high net worth individuals."
