5 hrs ago

Nasdaq Q50 ETF Surges Far Above Value of Holdings

Motilal Oswal Nasdaq Q50 ETF jumps 41% in a week even as underlying US stocks fall. What is happening? · livemint.com

An ETF is a fund that owns a group of investments, and people can buy its units on a stock exchange.

The value of those investments is called the NAV.

Usually, the ETF's trading price stays close to its NAV because more units can be created when demand rises.

For this fund, new units have been difficult to create because India's overseas investment limit was reached in April 2024.

At the same time, more people wanted to buy the limited units available on the exchange.

This pushed the trading price much higher than the value of the stocks inside the fund.

A rule change also allowed the daily trading range to be based on the previous day's trading price instead of an earlier NAV.

As a result, rising prices could help set even higher limits on later trading days.

Key facts

Price movement: ₹141.99 on 4 September to ₹199.89 on 10 September, a 41% increase.
Underlying portfolio: The value of the 50 underlying stocks fell 2.6% during the same period.
NAV versus market price: The NAV was ₹115.69 while the market price was ₹199.89 on 10 September.
Premium to NAV: The premium rose from 19.5% on 4 September to 72.8% on 10 September, after reaching 83% on 9 September.
Trading volume: Trading reached about ₹43 crore on 9 September, versus an earlier average daily volume of around ₹1.4 crore.
Unit creation constraint: India's overseas investment limit for ETFs was reached in April 2024, restricting creation of fresh units.
Price-band change: From 7 September, ETF price bands used the previous day's traded price rather than the NAV from two trading days earlier.

livemint.com · 5 hrs ago