Have you tried our Free Financial Planner yet? Have you tried our improved Calculators yet? Check out our new Insurance Tutorial Check out our new Investment Tutorial

Investing It!

Analysis of MOSt Shares Gold ETF – NFO

 

goldMotilal Oswal AMC has launched a New Fund Offer (NFO) scheme to invest in gold bullion. This scheme is named “MOSt Shares Gold ETF” with unique offering of investment *** consumption – in a very cost effective way and lower prices. Investment is this gold ETF scheme will be boon for retail investors.

Key Features

Objective:

To provide return by investing in gold bullion.

Benchmark:

Spot gold price.

Fund Manager:

Mr. Rajnish Rastogi

 

Subscription date:

This NFO will be open for subscription from 2nd March 2012 to 16th March 2012.

 

Investment during NFO:

Minimum investment Rs 10,000 and multiples of Re. 1

Buying or Selling of ETF units:

In trading lots of one unit (1gm) on stock exchanges and directly with AMC in creation of 10 units and multiples.

Entry and Exit Load:

Nil

Recurring expense:

1.3% p.a.

 

Settlement process:

The delivery of the physical gold will take T+5 days where “T” is the transaction day. The redemption of the same gold ETF in cash on exchanges for investor will take T+2 days.

Advantages of investing in this scheme

  • An investor for the first time gets an option to buy gold directly from AMC in 10 gram lots or buy/sell gold ETFs on stock exchange terminals in trading lots of 1 gram i.e. 1 unit or higher.
  • An investor gets the benefit to redeem ETF units for physical gold bars as low as 10 grams. Other AMCs give an option to redeem gold ETFs at 1kg (minimum) valued at Rs 29 lakhs (approx) at present prices which makes it difficult for retail investors to redeem gold units for consumption when required.
  • Get pure imported gold fineness or purity of 99.5% or higher.
  • Investors able to buy pure gold at much cheaper rate then other available option such as banks and jewellers who charge a premium of 8% to 20% premium over spot prices.
  • MOSt gold shares is supported by Riddhi Siddhi Bullions Ltd (RSBL), as primary authorized participants and market makers. RSBL is one of the largest bullion dealers in India and operates RSBL spot for gold and silver trading OTC systems across the world markets.
  • Initially, delivery centers will be available in four cities like Mumbai, Ahmedabad, Bangalore and Hyderabad. Then by end of this year it will cover 22 cities with pan India presence.
  • Units of MOSt gold shares are not liable for wealth tax unlike physical gold.
  • No entry and exit load
  • No storage and security issues for investors

Key risk factors

  • Fluctuations in the price of gold could adversely affect investment value of units.
  • The returns from physical gold in which the scheme invests may underperform returns from the securities or other asset classes.
  • Changes in regulations relating to import and export of gold or gold jewellery (includes customs duty, sales tax, etc) may affect the ability of the scheme to buy / sell gold against the purchase and redemption requests received.
  • Any change in the rates of indirect taxation would affect the valuation of the scheme.
  • Though this is an open-ended scheme, it would ordinarily repurchase unit in minimum size, presently 10 units of MOSt gold shares. Thus unit holdings less than the minimum size can be sold through the secondary market on NSE/BSE.

Key drivers for rise in gold prices

  • Quantitative easing by government in western countries to reduce the debts.
  • Globally, hedge funds, ETFs and mutual funds are driving up investment demand for gold.
  • Central banks are increasing reserves of gold aggressively across the world.

 

Comparative analysis

Post NFO

The units of this scheme will be listed on both NSE & BSE. So, investors can buy/sell the scheme units through their trading accounts with their broker/sub-brokers at the price quoted on stock exchanges. The minimum number of units that can be bought or sold is one unit (i.e. 1 gram).

The units of the scheme can also be directly bought or sold with AMC in lot of 10 units (10 grams) and multiples of 10 units (10 grams) thereof.

 

Conclusion

Gold ETFs gave return of 28% (approx.) in the last one year vis-a-vis equity funds that gave returns of 21% (approx.). So, to gain an advantage of appreciating price of gold led by demand and its consumption an investor should opt to have gold ETFs in their portfolio. Since, MOSt Gold shares are available in smaller lots to buy or sell and ease in redemption is an added advantage compare to other gold ETF schemes floating in the market.

Author

Hiral Thanawala is a PGDM (Finance) graduate and Certified Financial Planner. He can be reached at hiralthanawala@gmail.com

Published Mar 06 2012

Also read about:


Our Partners


Comments

Comments

No Comments
Our Partners

Control Panel
Admin Console
Was this Article useful?