Silver Exchange Traded Funds have been gaining traction among equity investors on the back of a sharp surge in silver prices and expectations of an increase in demand.
Silver prices on Monday increased 20 per cent to ₹1,22,800 per kg, against ₹1,02,089 on Friday, according to the India Bullion and Jewellers’ Association of India.
In the last one month, silver prices have jumped 28 per cent to ₹1,07,700 a kg last month, against ₹95,700 a kg.
Industrial usage, including in clean energy applications, solar energy and electric vehicles account for 52 per cent of silver demand.
The assets under management under silver ETF more than doubled last month to ₹25,334 crore, against ₹9,666 crore logged in the same period last year.
In fact, it was up 10 per cent month-on-month in August to ₹25,334 crore, from ₹22,964 crore in July.
Nippon India Silver ETF, the largest in the space, recorded the highest growth, more than doubling its AUM at ₹10,232 crore, against ₹4,037 crore logged in the same period last year, while that of ICICI Pru Silver ETF was up at ₹7,121 crore (₹3,151 crore).
Vikram Dhawan, Head, Commodities and Fund Manager, Nippon India Mutual Fund, said Silver ETFs in India have increasingly become a recognised investment product for investors to participate in the silver opportunity, offering transparent, regulated, liquid, and exchange-traded access to the metal.
This appeal is reinforced by global developments: the US has added silver to its updated Critical Minerals List, underscoring its precious, industrial, and strategic importance, he said.
Madhu Nair, MD and CEO, Union Mutual Fund, said the demand for silver will remain strong in the coming days due to growing demand and central banks slowly adding silver to their forex reserves as part of diversification.
The usage of silver is also expanding across key new-age sectors such as electronics, 5G infrastructure, solar panels and electric vehicles, he said.
It has emerged as a key component in battery systems, charging units and sensors, besides playing a critical role in semiconductor manufacture and server cooling due to its unmatched conductivity, said Nair.
Silver demand from solar energy generation companies is expected to hit 7,488 tonnes by 2029, from 5,671 tonnes last year.
Given the soaring prices of jewellery, silverware and investment, demand may slow down amid huge supply-side constraints, said an analyst.