PROJECT REPORT ON

FINANCIAL PERFORMANCE &

CUSTOMER AWARENESS OF
GOLD ETF IN INDIA

Submitted By
MRINAL KUMAR (BBA 4501/08)
 1.0 INTRODUCTION
• Exchange Traded Funds (ETFs) are mutual fund units
which investors buy/sell from the stock exchange, as
against a normal mutual fund unit, where the investor
buys /sells through a distributor or directly from the
AMC.
• They are open ended mutual funds that are passively
managed and most of them seek to mirror the return of
an index, a commodity or a basket of assets. ETFs are
listed and traded on stock exchanges like stocks.
 1.1 CONCEPTUAL FRAMEWORK
 ETF - The exchange-traded fund or ETF, is often
structured as an open-end investment company. ETFs
combine characteristics of both mutual funds and
closed-end funds.
 ETFs are traded throughout the day on a stock
exchange, just like closed-end funds, but at prices
generally approximating the ETF's net asset value.
 Contd…
• Unlike regular open-end mutual funds, ETFs can be
bought and sold throughout the trading day like any
stock.
• Gold ETFs provided investors a means of participating
in the gold bullion market without the necessity of
taking physical delivery of gold, and to buy and sell
that participation through the trading of units on stock
exchange.
 ETF BASICS
 If the demand of the ETFs in the markets soars, the ETF
would start trading at a premium from its intrinsic value,
which should be equal in proportion to the index that it is
charting. This premium would make the buyers go to the fund
house where they would have to redeem their shares in the
proportion held under each unit of the ETF.
 Such units that are bought directly from the fund house are
called "creation units".
 Usually the lot size in which one can buy creation units is so
high that only an authorized participant (market maker) or
institutional investors may have the wherewithal to buy these.
In such case the retail investor would have to go to the market
itself to buy the units of the ETF.
 Contd…
• ETFs offer public investors an undivided interest in a pool of units
and other assets.
• ETFs do not sell or redeem their individual shares at net asset
value, or NAV. Instead, financial institutions purchase and redeem
ETF shares directly from the ETF, but only in large blocks,
varying in size by ETF from 25,000 to 200,000 shares, called
"creation units".
• Purchases and redemptions of the creation units generally are in
kind, with the institutional investor contributing or receiving a
basket of units of the same type and proportion held by the ETF
• An ETF is basically created through an initial public
offering (IPO) by the Asset management companies in
which only authorized participants, institutions, large
investors are allowed to participate.
 Advantages of Exchange-Traded Funds

• Lower costs
• Buying and selling flexibility
• Market exposure and Diversification
• Continuous, Intraday Pricing
• Access to indicators and Indexes
• Diversity in Investment Opportunities
• Low Expense Ratios
• Transparency
• Ability to Track an Entire Market Segment
 GOLD ETF
 Gold exchange-traded products are exchange-traded
funds (ETFs), closed-end funds and exchange-traded
notes that aim to track the price of gold.
 The Gold ETF fund will purchase a large amount of
gold, maintaining the physical metal in storage. They
will then issue shares in baskets, the idea here being
that the value of the shares will increase with the price
of gold bullion.
 1.3 COMPANY PROFILE
COMPANY ALLOTMENT EXPENSE ENTRY EXIT LOAD NAV(22/3/2
DATE RATIO LOAD 011)

GOLD BEES 08/03/2007 1% NIL NIL 2,033.07

GOLDSHARE 01/03/2007 1% NIL NIL 2,032.44

KOTAKGOLD 20/06/2007 1% NIL NIL 2,031.69

RELGOLD 15/10/2007 1% NIL NIL 1,977.99

SBIGETS 30/03/2009 1% NIL NIL 2,070.45

QGOLD 21/01/2008 1% NIL NIL 1,010.85

 1.4 PROBLEM FORMULATION
• What is the Return on Investment of Gold ETFs over 1 and 2
year?
• What is the Standard Deviation among major Gold ETFs in
India?
• What is the measure of Skewness of different Gold ETFs in
India?
• What is the Coefficient of Correlation between the Gold ETF
and Nifty Index Return?
• How is Gold ETF different from Mutual Funds?
• What is the level of customer awareness among consumers
regarding investment avenues in Gold ETFs?
 3.1 OBJECTIVES OF THE STUDY
• To provide an insight into the concept of Gold ETF and to
study the benefits of investing in them.
• To analyze and compare the financial performance of
various Gold ETF in India and their relation to market
index movement.
• To ascertain the difference between Gold ETFs and Mutual
Funds.
• To conduct a primary study to find out the awareness of the
Gold ETF among investors and to ascertain the investment
behavior relating to Gold ETF and other investment options
in India.
 3.2 RESEARCH METHODOLGY
RESEARCH DESIGN: Descriptive Research

3.3 SAMPLING FRAMEWORK

SAMPLING DESIGN: Convenience sampling

SAMPLE SIZE: 50 Respondents
 Contd…
SOURCE OF DATA COLLECTION

PRIMARY DATA: The primary data was collected from

the sample through sample survey with the help of
questionnaire analysis.
SECONDARY DATA: The secondary data was collected
through the National Stock Exchange website
(http://www.nseindia.com) database for the past script
price of the various Gold ETFs studied in this project
and the index prices of NIFTY.
 4.0 DATA ANALYSIS & INTERPRETATION

STANDARD DEVIATION(2YR)
194

192

190

188

186

184

182

180
GOLDBEES GOLDSHARE KOTAKGOLD QUANTUMGOLD RELIANCEGOLD SBIGETS
 SKEWNESS(2YR)
0.12

0.1

0.08

0.06

0.04

0.02

0
GOLDBEES GOLDSHARE KOTAKGOLD QUANTUMGOLD RELIANCEGOLD SBIGETS
 RETURN(1YR)

23.4

23.3

23.2

23.1

23

22.9

22.8
GOLDBEES GOLDSHARE KOTAKGOLD QUANTUMGOLD RELIANCEGOLD SBIGETS

GOLD ETF RETURN(2 YR)

45
40
35
30
25
20
15
10
5
0
GOLDBEES GOLDSHARE KOTAKGOLD QUANTUMGOLD RELIANCEGOLD SBIGETS
 CORRELATION COEFFICIENT(2 YR)
0.87

0.86

0.85

0.84

0.83

0.82

0.81
GOLDBEES GOLDSHARE KOTAKGOLD QUANTUMGOLD RELIANCEGOLD SBIGETS
 BETA ANALYSIS

0.12

0.1

0.08

0.06

0.04

0.02

0
GOLDBEES GOLDSHARE KOTAKGOLD QUANTUMGOLD RELIANCEGOLD SBIGETS

-0.02

-0.04

-0.06
 Are you aware about Gold ETF?
90
80
70
60
50
40
30
20
10
0
YES NO

Do you invest in Gold ETF?

100
90
80
70
60
50
40
30
20
10
0
YES NO
 Which Gold ETF do you invest in?
OTHERS GOLDBEES
18% 18%

KOTAK GETF
9%

SBI GETS UTI GOLDSHARE

27% 27%

Reasons for investing in Gold ETF

Others
9% Less Volatility
18%
Portfolio Diversification
9%
Tradable Better Return
9% 9%

Electronic Form
9%

Safety
36%
 Investment option preferred
50

45 A

40
B
35

30 C

25
D
20

15 E

10

0
FD GOLD ETF DEBT PHYSICAL GOLD MUTUAL FUND EQUITY REAL ESTATE INSURANCE
 FACTORS INFLUENCING INVESTMENT
80

70

60

A
50 B
C
D
40
E

30

20

10

0
SAFETY CAPITAL GAIN TIME PERIOD TAX BENEFIT FIXED INCOME ROI
 5.0 FINDINGS OF THE STUDY

• The degree of variability of the return is significantly lower

than the degree of variability of the market index (NIFTY)
as found from the analysis of Standard Deviation.
• The return generated by Gold ETF is more than returns
provided by Debt Securities for 1 year and 2 year period
showing a skewness towards the higher value of the range..
• The returns of Gold ETF have a positive degree of
correlation with the market index (NIFTY).
• The Beta value of most of the Gold ETF is in negative
indicating that they have a reverse relation to the market
index return.
 Contd..
• Majority of the investors lack awareness and knowledge
about investment opportunities in Gold ETF schemes
offered by various AMCs (Asset Management
Companies) and hence do not invest in them.
• They prefer investment in other investment options
which provide them with safety of their returns along
with capital gain such as Fixed Deposits and Debt
securities.
• ETF schemes provide several advantages over normal
open ended Mutual Funds.
 Contd..
• The other investment products investors prefer are
Mutual Funds, Equity Shares, and Real Estate,
Insurance.
• The factors affecting investment are safety of return,
capital gain, return on investment and investment time
period.
 6.1 RECOMMENDATIONS OF THE STUDY

•  AMCs should take steps to increase customer

awareness regarding Gold ETF scheme investment
options and the benefits of investing in them.
• Stock exchanges should also take steps to increase
customer awareness with investor education and other
awareness campaigns through advertising in
newspapers, magazines and other advertisement media
instruments.
 Contd..
• Investors’ investing in gold should diversify portfolio
in Gold ETF instead of investing in Physical gold.
• AMCs should provide more trading flexibility in Open
ended Mutual Funds.
 6.2 CONCLUSION

• Gold ETFs offer investors a convenient way and means

of investing in gold as a security without the hassles of
storage and safety.
• It also provides various other benefits such as
electronic trading and Demat storage facility.
• Only few people were aware of the investment
opportunities in Gold ETF and some means must be
taken to educate and inform investors about the pros
and cons of investing in Gold ETFs.
 Contd..
• The financial performance analysis indicates that the
returns provided were better than debt securities such
as Fixed Deposits, Bonds, etc
• It also showed a positive degree of correlation
between market index return (NIFTY 50) and the
return provided by the various Gold ETFs.
 6.3 LIMITATIONS OF THE STUDY

• The survey mainly includes the salaried service class people

which could lead to results being more biased towards them as
compared to business men.
• The sample size is small as compared to the number of investors
present in India does not include investors of other geographical
areas.
• Majority of the investors are not aware about the concept of Gold
ETF.
• Majority of the investors’ who invest in gold prefer physical gold
instead of Gold ETF.