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BSE Warns Investors: International ETFs Trading at Inflated Prices Pose High Risk
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News18•25-09-2026, 23:00
BSE Warns Investors: International ETFs Trading at Inflated Prices Pose High Risk
- •BSE has cautioned investors against buying international ETFs at substantial premiums to their Net Asset Value (NAV), even if underlying overseas securities remain stable.
- •The premium arises because overseas investment limits for mutual funds are fully utilized, restricting the creation of new ETF units and limiting supply.
- •Investors purchasing these units at steep premiums face the risk of sudden price falls, unrelated to movements in overseas markets.
- •Price corrections could occur if overseas investment limits are increased or when the ETF trading framework changes on April 1, 2027, shifting the base price for bands to the previous day's NAV.
- •BSE advises extreme caution and due diligence, urging investors to check the NAV before placing orders in international ETFs.
Key Questions Answered
Mutual funds have fully utilized their overseas investment limits, restricting them from creating new ETF units. This limited supply combined with high investor demand causes market prices to rise significantly above the underlying asset value.
Investors face the risk of an abrupt price fall that is unrelated to movements in overseas markets. Prices could correct sharply if overseas investment limits are increased or when the base price calculation framework shifts.
SEBI issued a new ETF trading framework on June 15, 2026, with provisions relating to base prices, price bands, pre-open call auctions, and close-out procedures taking effect on September 7. A change shifting the base price to the previous day's NAV will occur from April 1, 2027.
