The Rise of Silver ETFs: Gaining a Spot in Smart Investor’s Portfolio

Silver has long been recognised as one of the most versatile metals, with applications ranging from industrial use to investment purposes. With over ₹14,000 crore already invested in Silver ETFs by Indian investors, these exchange-traded funds have emerged as a modern, efficient alternative to physical silver ownership. Combining affordability, security, and convenience, Silver ETFs provide an innovative way to diversify portfolios without the traditional challenges of owning physical silver.

Rise in Folios and Surge in Average AUM of Silver ETF

The silver ETFs have witnessed remarkable growth in both investor participation and asset accumulation between December 2023 and December 2024. Folios surged by an impressive 308.28%, climbing from 1,52,259 in December 2023 to 6,21,639 by the end of 2024. Similarly, the average assets under management (AAUM) saw a massive increase of 313.65%, rising from ₹3,012.60 crore in December 2023 to ₹12,461.67 crore in December 2024. This substantial growth highlights the increasing appeal of silver ETFs among investors. 

Silver ETFs Performance in 2024

Of the total silver ETFs available in the market, HDFC Silver ETFs stood out with the highest return of 22.02% in 2024. Nippon India Silver ETF followed closely, delivering a return of 20.33% during the same timeframe. Meanwhile, UTI Silver ETF recorded the lowest return, approximately 18.46%, for the year.

What Are Silver ETFs?

Silver Exchange-Traded Funds (ETFs) allow investors to gain exposure to silver’s value without the need to physically own or store the metal. These ETFs are listed on stock exchanges and traded similarly to shares, making them accessible and easy to manage for anyone with a demat account.

Investing in physical silver often entails concerns such as storage, theft, and insurance costs. Silver ETFs address these challenges effectively. Backed by 99.9% high-purity silver, these funds provide safety and transparency. The underlying silver is securely stored with SEBI-regulated custodians, ensuring investors’ peace of mind.

The Unique Role of Silver as an Asset

Silver plays a dual role in the economy:

• Precious Metal: Like gold, silver is a store of value and acts as a hedge against inflation and economic uncertainty.
• Industrial Commodity: Approximately 60% of silver’s global demand comes from industries like electronics, renewable energy, and automotive manufacturing.

India’s silver imports reached approximately 8,000 tonnes in 2024, reflecting robust industrial and investment demand. The increasing focus on clean energy and technological advancements continues to drive industrial demand, which surged by 11% in 2023 and another 9% in 2024, totalling nearly 711 million ounces.

This unique combination of investment and industrial appeal makes silver a highly versatile asset in an investment portfolio.

Why Silver ETFs Appeal to Indian Investors?

Silver ETFs offer several advantages:

1. Convenience: They eliminate the logistical challenges of owning and storing physical silver.
2. Transparency: The funds are backed by physical silver and stored securely by SEBI-regulated custodians.
3. Affordability: Investors can purchase Silver ETFs in small quantities, making them accessible to a broader audience.

For Indian investors, Silver ETFs serve as an efficient tool to participate in the growing demand for silver, driven by both domestic consumption and global trends in the technology and energy sectors.

Diversification Benefits of Silver ETFs

Diversification is a cornerstone of prudent investing, and Silver ETFs provide an excellent means to achieve it. By adding silver to a portfolio of equities, debt instruments, or gold, investors can reduce overall risk and enhance stability.

• Low Correlation with Stock Indices: Silver’s price movements often differ from those of the equity markets, providing a stabilising effect during market volatility.
• Hedge Against Inflation: In inflationary periods, silver tends to retain its value, preserving the purchasing power of your portfolio.
• Long-Term Potential: The industrial growth of silver, especially in sectors like renewable energy and electronics, offers long-term investment appeal.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Mutual Fund investments in the securities market are subject to market risks, read all the related documents carefully before investing.