With investors increasingly looking at gold amid global uncertainty in stock markets, Indian ratings agency Crisil launched the country's first gold index on Monday.
The index will indicate returns on gold exchange traded funds (ETFs). It will track the performance of gold in the Indian market and act as a benchmark for performance evaluation of investment products that have gold as underlying.
ETFs are the most popular form of gold trading, as they eliminate logistical complexities of purchasing gold. Buying gold through the ETF route one is investing in a conglomerate of corporations, rather than a single company.
The index value will represent the rupee denominated landed price of 10 grams of gold in Mumbai and the index value for a particular day will be updated on the Crisil website at 8 pm daily.
The index has a base date of 2 January 2007. Crisil expects all gold exchange traded funds and fund of funds to use the index as a benchmark. Currently, gold ETFs in India benchmark their performance to the price of gold on the domestic commodity exchanges or local bullion market, and this leads to inconsistency.
Currently, there are 11 gold ETFs and three gold FoFs (fund of funds), for which fund houses calculate values on their own.