Whalesbook
Soaring ETF Demand
Indian investors have dramatically increased their exposure to silver, with exchange-traded funds (ETFs) now holding over 3,000 tonnes. This figure represents a staggering 120% jump in holdings over the past 18 months, surpassing 1,380 tonnes at the close of 2024. The growth indicates that ETF investors are absorbing a significant portion, approximately a quarter, of India's imported silver.
Price Surge and Investor Rationale
The white metal's price has seen an extraordinary surge, climbing more than 200% in the past year and 49% in the last month alone. Spot prices have traded above ₹3,09,000 per kg, with MCX futures reaching ₹3,25,000 per kg. This rally has fueled investment demand, with many buying physical silver for investment purposes. Experts note that even at current elevated prices, investors are profiting due to a lower average cost basis established over time.
Taxation Advantage
The investment appeal is further enhanced by favorable taxation rules. Short-term capital gains on gold and silver ETFs are taxed according to an investor's income slab. For long-term holdings, defined as 12 months or more for ETFs, the tax rate is a competitive 12.5%.
Market Outlook and External Factors
Despite the strong demand, market watchers suggest prices may be overbought, with a potential short-term correction on the horizon. A recent Metal Focus report indicated a possible downside but predicted it would not deter sustained investor interest. Meanwhile, external factors like the U.S. administration deferring critical minerals tariffs on silver offer temporary relief from trade-related price pressures. Concerns regarding potential Chinese export bans are also deemed overstated by analysts, suggesting that current market conditions are unlikely to be significantly disrupted.