Indian investors looking to invest in Silver ETFs may be getting a raw deal. According to the Axis mutual fund report, Silver ETF prices are trading at steep premiums over international benchmarks.
The premium of the Indian silver price over the global price surged from almost 0.5% in early September to nearly 5.7% (as of October 9 close), with intraday spikes of up to 12%, according to the report.
Silver is an internationally traded commodity. Silver price in India is influenced not only by what’s happening globally but is also subject to import duty and taxes. Additionally, a domestic premium is added before the Silver ETF price is calculated.
Silver ETF investors are facing valuation issues, particularly when ETF units are priced higher than the real value of silver in the spot market.
In the spot market, silver price today is around Rs 1,46,640 per kg. Silver spot price in the international market has surged past $50 per ounce on October 10, before conversion to Indian Rupee.
Here’s why Indian Silver ETFs are seeing a ‘premium’, according to the Axis mutual fund report:
The international spot price or the LBMA price forms the baseline for silver valuation in India.
The LBMA price is then converted to INR per kg using USD/INR rate plus customs duty and taxes. Silver import duty and taxes add roughly 10–12% to USD price. This is the import parity price in Indian markets.
Still, actual traded price in Indian bullion markets or MCX can deviate from the import parity price based on local demand-supply. Currently, there is likely a 5–10% above import parity due to festive demand and shortage.
In the last step, the portfolio value per unit is derived from domestic silver prices by calculating the fund’s physical silver at the LBMA price adjusted to INR and domestic premium. Thus, NAV fully reflects any Indian premium.
“Recently, ETF market prices ran even higher intraday due to creation delays, adding an extra layer of premium before normalizing. Under normal conditions, any gap between Indian and global prices would be small and arbitraged away (since ETF authorized participants can swap silver for units and vice versa). But in the current scenario, with physical silver scarce, the premium persisted, and even ETF arbitrageurs could not immediately bridge the difference,” says the report.
Silver has stormed into the party that gold started. So far in 2025, gold has risen 55%, while silver has increased by more than 77%. Investors are latching on to physical silver in the form of bars and coins as well as pouring money into Silver ETFs.
A confluence of factors – from record festive buying to global supply deficits – has driven domestic silver prices to record highs and pushed ETF prices to trade at steep premiums over international benchmarks.
In the Indian silver market, there’s a demand-supply mismatch that has pushed domestic and retail silver prices well above international benchmarks.
For Investors, paying a ‘premium’ is like an entry cost. The present domestic premium of 5-12% means paying that much more than the global fair value of silver.
This inflated entry price is likely because of supply constraints and the ‘premium’ one is paying now may “wash out” as supply normalizes. Short-term pricing distortions shouldn’t worry investors with medium- to long-term investment goals. Still, the ETF market should evolve quickly to changing dynamics, as they are supposed to let investors buy at prices close to the physical price.