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Gold and silver investors should take note of these changes as precious metal ETFs can see sharp price movements, particularly when international bullion markets move while Indian markets are closed.

What Has SEBI Changed in ETF Trading?

An ETF essentially has two important values. Its Net Asset Value (NAV) represents the per-unit value of the assets held by the fund, while its market price is determined by buying and selling activity on the stock exchange.

Ideally, the ETF’s market price should remain close to its NAV. However, the two can diverge, particularly during periods of high volatility or when an ETF has relatively low trading volumes.

SEBI has now changed several aspects of the ETF trading framework to improve this price discovery process.

New ETF Base Price System From September 7

Under the earlier system, an ETF’s base price was linked to its NAV from two trading days earlier, or T-2 NAV. Most ETFs could then move within a 20% price band on either side of that base price.

Under the revised framework, the base price will instead be linked to the previous trading day’s closing price. It will be calculated using the Volume-Weighted Average Price (VWAP) of the ETF during the final 30 minutes of the previous trading session.

In practical terms, the next day’s trading range will be based more closely on where the ETF actually traded toward the end of the previous session rather than relying on a two-day-old NAV.

Different ETFs Will Now Have Different Price Bands

SEBI has also introduced different price-band structures depending on the category of ETF.

• Equity and debt ETFs: Initial price band of 10%, which can be expanded in stages up to 20%.
• Whenever the applicable limit is reached, a 15-minute cooling-off period will apply before the band can be widened further.
• Gold and silver ETFs: Initial price band of 6%, with the ability to widen the band in 3% increments without an upper limit.
• Overnight and liquid ETFs: A fixed 5% price band will continue to apply.

The framework is particularly relevant for gold and silver ETFs because international bullion prices can move substantially while Indian markets are closed. The revised structure provides greater flexibility for these ETFs to adjust to significant overnight changes.

Gold and Silver ETFs to Get Pre-Open Call Auction

One of the most important changes for precious metal investors is the introduction of a pre-open call auction for gold and silver ETFs.

From September 7, buy and sell orders will be collected during the pre-open period and matched at a single equilibrium price. The objective is to make the opening price more representative of overall demand and supply instead of allowing an isolated order to disproportionately influence the opening trade.

According to the India Today report, the move is intended to improve price discovery and bring ETF trading prices closer to the value of their underlying assets.

Will Gold and Silver ETFs Always Trade at NAV?

No. The revised rules do not guarantee that an ETF’s market price will always exactly match its NAV.

Gold and silver ETFs can still trade at a premium or discount to NAV, depending on factors such as investor demand, supply, trading volumes and liquidity.

The new framework also does not change ETF returns, investment costs or taxation.

What Should Gold and Silver ETF Investors Do?

Investors should pay close attention to the indicative NAV (iNAV) before placing trades, particularly when markets are volatile or an ETF has relatively low liquidity.

Using limit orders can also help investors control the price at which their ETF units are bought or sold instead of relying entirely on the prevailing market order.

The new rules are primarily designed to improve the way ETFs respond to changes in their underlying assets. Investors should therefore understand the difference between an ETF’s NAV and its exchange-traded market price before making investment decisions.

Why These Changes Matter for Gold and Silver Investors

Gold and silver are traded globally, meaning their international prices can change significantly outside Indian market hours. When Indian exchanges reopen, precious metal ETFs may need to adjust quickly to these overnight movements.

The revised price-band mechanism and pre-open auction are designed to provide ETFs with greater flexibility and potentially improve the price-discovery process when such gaps occur.

For investors, the key takeaway is that gold and silver ETF trading may behave differently under the new framework, especially during periods of sharp international price movements.

FAQs

1. What are the major changes SEBI has made to ETF trading?

SEBI has revised several ETF trading rules, including the method used to determine the base price, price bands, pre-open trading and close-out process. The revised framework came into effect on September 7, 2026, with the broader objective of improving ETF price discovery and keeping market prices more closely aligned with underlying asset values.

2. What has changed for gold and silver ETFs?

Gold and silver ETFs will now have an initial 6% price band, which can be widened in 3% increments without an upper limit. They will also have a pre-open call auction at the beginning of the trading session. These changes are particularly relevant because international gold and silver prices can move sharply while Indian markets are closed.

3. Will gold and silver ETFs always trade at their NAV after the new SEBI rules?

No. The new framework does not guarantee that an ETF’s market price will always be equal to its Net Asset Value (NAV). Gold and silver ETFs can still trade at a premium or discount depending on demand, supply, liquidity and market conditions.

4. What is the new base price for ETFs under the revised rules?

Under the new framework, the ETF’s base price is linked to the previous trading day’s closing price, calculated using the Volume-Weighted Average Price (VWAP) of trades during the final 30 minutes of that session. This replaces the earlier approach that used the ETF’s T-2 NAV as the base price.

5. What should investors check before trading gold or silver ETFs?

Investors should consider checking the ETF’s indicative NAV (iNAV) before placing an order, particularly during periods of high volatility or when liquidity is low. Using limit orders can also help investors control their execution price. The new SEBI framework does not change ETF returns, costs or taxation.

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The proposal forms part of SEBI’s review and expansion of the SEBI (Vault Managers) Regulations, 2021. The objective is to create a harmonised vaulting framework covering physical gold, silver and other precious metals held as underlying assets for regulated financial products.

Under the proposed framework, vault managers would be responsible for bullion linked to Electronic Gold Receipts (EGRs), bullion ETFs, bullion derivatives and any other bullion-related instruments notified by SEBI.

At present, the vault manager framework mainly applies to physical gold backing EGRs traded on recognised stock exchanges. Vault managers receive, store and safeguard the physical gold and support the creation and extinguishment of EGRs.

The 2021 regulations already establish requirements covering registration, governance, net worth, risk management, internal controls, insurance, record keeping, reconciliation, audits, grievance redressal and business continuity. SEBI now wants to extend these safeguards to a wider set of financial products involving physical precious metals.

Why SEBI Wants Common Vaulting Rules

SEBI said the existing framework provides a strong foundation that can be expanded to cover additional products requiring secure custody of physical bullion.

“Given the rapid growth of physically backed precious metal products and the increasing concentration of investor assets in a limited number of vaults, extending the Vault Manager regulatory framework to cover storage of gold, silver and other precious metals underlying ETFs and derivatives on such bullion would mitigate operational risks, ensure regulatory consistency across similar custody activities and strengthen investor protection in the Indian securities market,” SEBI said.

The regulator has therefore proposed “a harmonised vaulting regime applicable to all physical bullion, including gold, silver and such precious metals, which are the underlying of Sebi-regulated products and are held pursuant to Sebi regulatory requirements”.

The proposed regime would introduce consistent requirements for vault infrastructure, governance, eligibility, operational controls, purity verification, insurance, cybersecurity, business continuity, auditing, inspection, record maintenance and risk management.

According to SEBI, common standards would also make regulatory supervision more effective and provide greater confidence to investors holding bullion through regulated financial products.

“It would also facilitate effective supervision by Sebi, and enhance investor confidence by ensuring that all investor-owned bullion held for Sebi-regulated products are subject to a common and robust regulatory framework, irrespective of the product through which such exposure is obtained,” it said.

Gold and Silver Markets Have Expanded

SEBI noted that India’s bullion market has undergone substantial changes with the expansion of products such as gold ETFs, silver ETFs and bullion-backed derivatives.

India remains one of the world’s largest gold-consuming markets, while electronic gold products have expanded as investors increasingly look for alternatives to directly holding physical bullion. The proposed changes are intended to ensure that the physical metal supporting these financial products is governed by consistent custody standards.

The consultation paper also proposes a circular outlining the framework for EGRs and operational guidelines for vaulting services covering bullion-related instruments specified by SEBI.

Public Comments Invited Until September 1

SEBI has invited stakeholders and members of the public to submit comments on the consultation paper and proposed regulatory changes until September 1.

If implemented, the expanded framework would bring physical bullion held against different SEBI-regulated products under a common set of standards, potentially strengthening operational safeguards, transparency and investor protection across India’s growing bullion market.

FAQs

1. What has SEBI proposed for gold and silver vaults?

SEBI has proposed expanding the existing Vault Managers Regulations, 2021, so they cover physical gold, silver and other precious metals underlying a wider range of SEBI-regulated products, including ETFs and bullion derivatives.

2. Which products could come under the expanded vaulting framework?

The proposed framework would cover physical bullion backing Electronic Gold Receipts, bullion ETFs, bullion derivatives and any other bullion-related instruments that SEBI may specify.

3. What is the current role of vault managers under SEBI rules?

Under the existing framework, vault managers primarily store and safeguard physical gold underlying EGRs traded on recognised stock exchanges. They also facilitate the creation and extinguishment of EGRs.

4. Why does SEBI want a harmonised vaulting regime?

SEBI believes common standards could reduce operational risks and create consistency in areas such as vault infrastructure, purity verification, insurance, cybersecurity, audits, record keeping and risk management. The framework is also intended to strengthen investor protection and confidence.

5. Until when can stakeholders submit comments on SEBI’s proposal?

SEBI has invited public comments on the consultation paper and proposed changes until September 1, 2026. Stakeholders can provide feedback before the regulator considers further action on the proposed framework.

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The proceeds from the IPO are earmarked for several objectives, such as funding the establishment of 12 new stores in Maharashtra, settling certain company debts, and addressing general corporate needs. P N Gadgil Jewellers Limited holds the distinction of being the second-largest among organized jewelry players in Maharashtra, as of January 2024, operating within India’s largest market for BIS-registered outlets. Noteworthy is its status as the fastest-growing jewelry brand among India’s major organized jewelry players, evidenced by robust revenue growth between FY21 and FY23, accompanied by an impressive EBITDA increase of 56.50% over the same period. Additionally, the company achieved the highest revenue per square foot among India’s leading organized jewelry brands in FY23.

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As of December 31, 2023, the company manages a total of 33 stores, comprising 32 outlets situated across 18 cities in Maharashtra and Goa, and one store located in the U.S., spanning a combined retail area of approximately 95,885 square feet. These stores are under the direct management of the company, with 23 operated as owned stores and 10 operating under a franchisee-owned and company-operated (“FOCO”) model. The store formats include 19 large format stores, 11 medium format stores, and 3 small format stores. Furthermore, the company introduced its mobile application “PNG Jewellers” in March 2022, aimed at enhancing customer engagement by providing updates on new designs and collections. Jewelry manufacturing is conducted by a workforce of over 75 skilled artisans, both within and outside Maharashtra.

Drawing upon its extensive legacy tracing back to 1832, P N Gadgil Jewellers Limited provides an extensive array of precious metal and jewelry products, encompassing gold, silver, platinum, and diamond jewelry. These offerings cater to diverse price ranges and designs, suitable for both special occasions and everyday wear. Saurabh Vidyadhar Gadgil, the promoter, boasts over 25 years of experience in the Indian jewelry manufacturing sector and currently serves as the managing director. His leadership has been instrumental in the transformation of the traditional family business into a contemporary brand, shaping its modern identity and market presence.

Motilal Oswal Investment Advisors Limited, Nuvama Wealth Management Limited (formerly known as Edelweiss Securities Limited), and BOB Capital Markets Limited are the Book Running Lead Managers to the issue.