6 Global ETFs in India Trade at Premiums of Up to 111.8% to NAV

International exchange-traded funds (ETFs) listed on Indian exchanges are trading at substantial premiums to their underlying net asset values (NAVs), with some premiums exceeding 100 per cent. The widening gap reflects strong investor demand for overseas exposure and restrictions on fresh foreign investments by Indian Mutual Funds, raising concerns about the risks of buying these ETFs at inflated market prices.

The Motilal Oswal Nasdaq Q50 ETF was trading at a premium of 111.8 per cent as of October 14, 2026, compared with 62.6 per cent on September 30. Other international ETFs also recorded significant premiums, although the extent varied across funds. The Mirae Asset NYSE FANG+ ETF traded at a premium of 59.5 per cent, while the Mirae Asset S&P 500 Top 50 ETF recorded a premium of 58.9 per cent. The Mirae Asset Hang Seng TECH ETF traded at a premium of 31.1 per cent, followed by the Motilal Oswal Nasdaq 100 ETF at 15.3 per cent and Nippon India Hang Seng BeES at 4.6 per cent.

These premiums are calculated using closing market prices and same-day NAVs as of October 14, 2026, and do not represent live quotes for October 23. The significant variation across funds highlights that premiums are not uniform across international ETFs.

The primary reason behind these elevated premiums is the restriction on overseas investments by Indian mutual funds. Under the Securities and Exchange Board of India (SEBI) framework, the mutual fund industry is permitted to invest up to USD 7 billion in overseas securities and up to USD 1 billion in overseas ETFs. Individual mutual funds are subject to investment limits of USD 1 billion in overseas securities and USD 300 million in overseas ETFs. These restrictions have constrained fresh overseas investments and limited the creation of new ETF units, while investor demand for international exposure has remained strong.

ETFs trade on stock exchanges, where market prices are determined by demand and supply. When demand for existing units exceeds the available supply, their market prices can diverge significantly from the NAV of the underlying holdings. This imbalance has contributed to the unusually high premiums observed in several international ETFs.

The increase in ETF premiums does not necessarily indicate a corresponding rally in overseas equity markets. On October 14, the Motilal Oswal Nasdaq Q50 ETF was trading at Rs 249.83 against an NAV of Rs 117.96, meaning its market price was more than double the value of its underlying assets. Such a premium can expose investors to significant losses if the gap narrows, even when the underlying overseas securities remain unchanged in value.

Changes in ETF trading price bands have also influenced the extent to which market prices can diverge from NAV. The elevated premiums reflect a combination of demand for international diversification, limited creation of new ETF units and the growing difference between exchange-traded prices and underlying asset values.

For investors, these premiums can materially affect returns. An ETF trading at a 50 per cent premium means an investor pays Rs 150 for underlying assets worth Rs 100. The additional Rs 50 does not represent an increase in the value of the fund's holdings. If the premium subsequently disappears while the NAV remains unchanged, the market price would decline by approximately 33.3 per cent.

The BSE has also cautioned market participants about the risks associated with trading international ETFs at prices significantly above their underlying asset values. Investors should therefore monitor the market price, NAV, indicative NAV (iNAV), liquidity and premium-to-NAV ratio before making investment decisions.

International ETFs continue to provide Indian investors with access to overseas markets through domestic exchanges. However, the unusually wide premiums highlight how strong demand and limited supply can cause ETF prices to deviate substantially from the performance of their underlying investments, increasing the risk of losses if those premiums narrow.

Disclaimer: The article is for informational purposes only and not investment advice.