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Why some ETFs trade at 20% premium while others stay near fair value
International ETFs trade at 8% to 20% premiums while Nifty 50 ETFs stay within 0.6% of NAV. Here's why the gap matters and how to check before buying.
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If you have ever invested in an ETF, you may have noticed that it displays two values–a market price and a net asset value (NAV). Unlike other mutual funds, where investors transact only at the NAV, ETFs are bought and sold on stock exchanges throughout the day at market prices.
The NAV represents the per-unit value of the securities held by the ETF and is calculated by the fund house, while the market price is determined by demand and supply on the exchange. Although these values usually remain close, ETFs can trade at a premium (market price above NAV) or a discount (market price below NAV).
It is calculated by comparing the market price with the NAV and expressing the difference as a percentage of the NAV. A positive result means a premium, and a negative result means a discount.
*Source: NSE, Price as on 23 July and NAV as on 22 July, 2026
Bharath Rathore, Executive Director, Anand Rathi Wealth, said, “The widest discounts are largely seen in sectoral and silver ETFs, where lower liquidity, speculative trading and sharp movements in metal prices can temporarily widen the gap between market price and NAV. Such deviations are generally short-lived and should not be treated as investment opportunities.”
According to Rathore, almost all Nifty 50 ETFs are trading within a narrow 0.1% to 0.6% discount to NAV, reflecting efficient pricing. Small premiums or discounts are a normal feature of ETF trading and are usually caused by liquidity, bid-ask spreads, or temporary market factors.
*Source: NSE, Price as on 23 July and NAV as on 22 July, 2026
Rathore said most ETFs trading at the highest premiums are international ETFs, with some quoting 8% to 20% above their NAV.
He attributed these premiums to restrictions on fresh unit creation after overseas investment limits were exhausted, even as investor demand remained strong. He cautioned that investors buying such ETFs are paying significantly above the value of the underlying portfolio, and the premium could disappear once supply normalises.
He also suggested that international investments should ideally account for only 5% to 10% of an overall portfolio.