After a long wait, investors can now hope to buy and sell gold like shares on the stock exchanges. The Securities and Exchange Board of India (Sebi) is in the final stages of clearing Gold Exchange Traded Funds in India, the largest market for the yellow metal in the world.

Though two mutual funds — Benchmark Mutual Fund and UTI Mutual Fund — have already submitted proposals for gold funds in the market, the market regulator took its own time to fine-tune the concept. Many other fund houses, including DSP Merrill Lynch, are also interested in coming out with these funds.

“We are expecting the Sebi to clear these two schemes soon,” says chairman of Association of Mutual Funds of India, AP Kurien. “This instrument would give small investors to accumulate gold in small amount over years and helps them to diversify their portfolio,” he said, adding, “as and when he wants to sell, he can either get gold or simply sell the units.”

The regulator has amended the Custodian of Securities Act, enabling the custodians of the proposed gold funds to outsource the safekeeping of bullion to outside agencies. But the Sebi has made it clear that the custodians would be responsible to its clients (mutual funds) for safekeeping of the gold kept with other person, including any associated risks.

ETF is a new term for Indian investors. Globally ETFs handle assets worth billions of dollars. There are over 300 ETFs in the US alone. “For Indian investors, it will be a new investment avenue... our investors are familiar with the gold market and its price movements,” said a mutual fund source.

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