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ETF Plunges 49% Amidst Market Frenzy
24 Sep
Summary
- Motilal Oswal Nasdaq Q50 ETF dropped 49% in three sessions.
- ETF's price surged 179% before a dramatic reversal.
- RBI limits restrict overseas investments for mutual funds.
The Motilal Oswal Nasdaq Q50 ETF has seen a severe downturn, losing nearly 49% of its value in just three trading sessions. This sharp reversal followed an extraordinary price surge of 179% in the preceding two weeks, climbing from ₹141.93 on September 4 to ₹396.30 by September 18. The ETF's market price had previously reached as high as ₹471.99 before experiencing consecutive 20% drops on Wednesday and preceding days.
This volatile trading in international ETFs highlights a broader trend where several such funds are trading at significant premiums to their net asset values (NAVs). Even after its recent slump, the Nasdaq Q50 ETF was trading at a 67% premium. This situation is partly fueled by strong overseas market returns and Indian equities' underperformance, driving investor demand for international exposure.
Mutual funds' ability to invest in overseas stocks is constrained by the RBI's $7 billion industry investment limit. This restriction, coupled with a limited supply of ETF units not keeping pace with demand, has pushed exchange-traded prices well above their underlying portfolio values. Financial planners advise caution, as buying at such premiums risks substantial losses when market prices converge with NAVs.
