An ETF has 2 components. A NAV and the price. The NAV is nothing but the value of all the underlying assets minus liabilities divided by the number of units. The price is what the units are trading in the market.
What you are looking at is the NAV on the MOSL site and the price on Kite.
A difference of Rs 87.7. This is due to the illiquidity of the ETF. Today just 1,286 units of the ETF were traded.
Yes, it is. The way ETFs work are, the fund house appoints market makers/authorized participants to ensure the spreads aren’t too wide. The market maker offers both the bid and the ask and pockets the difference. When an ETF is launched, the AMC defines the size of something called as a creation unit. This unit size is determined in proportion to the underlying index. The idea if you were to give one unit of a creation unit is given to the AMC, you should receive all the shares comprising an index in the same proportion.
This works through a creation and redemption mechanism. If the ETF is trading at a premium, then the market maker will sell the ETF in the open market to push down the price. Where does he get the units? He deposits the shares making up the underlying index to the AMC which in turn gives the market maker the ETF units which he, in turn, sells it on the open market to take advantage of arbitrage opportunities.
So, market maker keeps creating and redeeming units based on the NAV, demand and supply thereby reducing the spreads. So if you were to take advantage of the opportunity, which isn’t really feasible, you will have to deliver the shares of the NASDAQ index equivalent to 100,000 units of N100 ETF which makes one creation unit. You can then sell it on the exchange and pocket the difference.
Now, why the difference in NAV of MOST N100?
Simple answer is liquidity and probably the lack of active market makers in the unit. You can check the creation/redemption activity of the ETF here and you can see that the last activity was on June 29th. Also, Motilal AMC isn’t really focussed on their ETF busniess. The CEO of Motilal AMC, Aashish P. Somaiyaa in an interview with Livemint called their ETF business, quote
Another deviation is the ETF business, although we are not growing it.
ETFs aren’t really a popular mode of investing. Except for a few Nifty 50 ETFS, all of the remaining ETFS are illiquid. Index funds are better of way investing.
If you still wish to have internation exposure in your porfolio, you can invest in mutual funds which have global exposure. I had compiled a list of funds which invest globally