DSP MF launches silver ETFs amidst market volatility

• DSP Investment Managers launches a silver ETF, which will invest in physical silver and silver related instruments.
• Investment in silver can be a hedge against traditional equity and debt products.
• Silver ETF is more suited to experienced investors who understand commodity cycles.

DSP Investment Managers on Monday launched DSP Silver ETF (exchange traded fund), which will invest in physical silver and silver related instruments. This investment vehicle will give investors an opportunity to invest in this precious metal without physically holding it. The ETF’s price will be in line with the price movement of silver.

Silver prices are driven by its industrial consumption and supply side dynamics. The precious metal is a hedge against the traditional equity-debt portfolio, as silver has low-correlation with both asset classes. However, silver is a high-risk asset class and, therefore, it is more suited to investors who understand precious metals and commodity cycles.

A silver ETF can be used to hedge against equity and debt market products in times of volatility. “This new ETF offers investors an easier way to buy or sell silver compared to the physical version with the freedom to trade easily,” said DSP Investment Managers on Monday. Moreover, demand for physical silver is also very high because of its wide use across industries including jewelry businesses, solar panels and electrical conductors.

Data suggests that close to 50% of the world's silver is consumed by electronics, auto, power, pharma and many other industries but the supply and availability for recycling is limited. DSP believes that as the world shifts to renewable and cleaner energy resources, there is potential for demand to go up since silver is a crucial raw material.

DSP Silver ETF would allow investors to buy the precious metal starting from a ticket size of ₹5000. The new fund offer (NFO) of the Silver ETF opens for subscription on 1 August and closes on 12 August.

Besides, silver can also potentially act as leverage against a depreciating rupee. This is because silver prices in India are derived from international silver prices but are then converted after adding currency effects and other costs of landing.

“Investing in silver via an ETF is a modern and smart way for investors to gain exposure to this precious metal in an easy, digital form. Increasing demand for silver in industries, newer technologies and a shift to renewable sources of energy and the safe-haven demand can also act as favourable tailwinds for the metal. However, investors should expect fluctuations in short-term returns, especially during times of market volatility,” Anil Ghelani, CFA, head – passive investments and products at DSP Investment Managers.

ETFs are a type of funds that are bought and sold the same as a stock on the exchange and the underlying asset in this case would be silver. The price of the ETF is tracked to an underlying index, here it will follow the price of silver in the real world.

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