To put it in perspective, the value of the subscription in Series I alone is over Rs 2,316.37 crore taken out in SGBs throughout FY20.
SGB had received a record Rs 3,387 crore Series V subscription in FY21 in terms of value.
Gold investors in India appear to have reached maturity as they show increasing interest in paper gold, especially gold sovereign bonds (SGBs). SGB Series I, whose subscription ended on May 21, received the second highest subscription in value and volume since SGB launched in 2015. The subscription came to Rs 2,541 crore in value , while in terms of quantity, the units subscribed were equivalent to 5.32 tonnes.
To put it in perspective, the value of the subscription in Series I alone is over Rs 2316.37 crore taken out in SGBs throughout FY20. In FY21, however, the subscription stood at a whopping Rs 16,048.74 crore in value.
SGB had received a record subscription of Rs 3,387 crore in Series V in FY21 in terms of value and 6.35 tonnes in terms of quantity. SGBs were launched with the intention of reducing imports of the yellow metal.
Brokerage firms such as Zerodha and HDFC Securities have seen strong SGB growth on their platforms. Launched in November 2016 on the Zerodha platform, SGBs saw virtually no activity in the first issues, but volumes increased from April 2020 from around 10 kilograms earlier to 100 -200 kilograms in the last issues. Zerodha CEO and founder Nithin Kamath said the SGB Series I problem was the highest on record at 250kg.
HDFC Securities launched SGBs in July 2016. “We launched it the same day it was made available on the exchange platform. We saw an 8-9 fold growth between 2016-2017 and 2020-2021 in terms of value and 5 times in terms of quantity, ”says Ashish Rathi, full-time director, HDFC Securities.
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“The uncertainties associated with the pandemic have led retail investors to safe-haven assets like gold. Many retail investors have opted for the paper form of investment due to foreclosure restrictions and storage risk,” adds he does.
Three successive series
The government typically releases 10 to 12 sets of GBS in a fiscal year. The two-series subscription for FY22 has ended, while the third will end on June 4. Series IV will launch on July 12. Subscription data for Series II has yet to be released.
Get paid for the property
There are two main reasons why investors prefer SGBs to any other paper form of gold – 2.5 percent interest per annum paid semi-annually on the investment amount and the free maturity amount. tax after 8 years.
Explaining the difference between SGBs and digital gold, Kamath says, “SGBs are a much better way to invest in gold than digital gold. In digital gold, you pay 3% GST and 3-4% spreads and commissions. Compare that for SGBs you get paid to own them since you get 2.5% interest. For example, in Series I of FY 22, investors saved over Rs 6 crore in GST and commissions compared to digital gold, ”says Kamath.
In addition, if you subscribe to SGB online, you get a discount of Rs 50 on the issue price. For example, the issue price of the current series (Series III) has been set at Rs 4,889 per unit. If you apply online and pay digitally, the issue price will drop to Rs 4,839 per unit. One unit contains 1 gram of gold.
Lump-sum or staggered investment
Since it is difficult to predict the price path, a flat rate investment is only advisable when gold prices are trading well below all-time highs. Investing a certain amount in each tranche offers the possibility of controlling the time risk. “The tranche provides the opportunity to capture price differences and a window to add more funds to SGBs, periodically. One-time investors can opt for a lump sum investment in any of the series,” said Rathi of HDFC Securities. Gold prices had reached a record high of Rs 56,191 in August 2020.
Gold gives you a hedge against inflation. Experts advise keeping at least 5-10% of your portfolio in gold.
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