Why MON100 is trading around 10% higher than NAV?
These ETFs cant create new units due to RBI restrictions.
It is not just the ETF, Motilal Oswal Nasdaq 100 FoF is also trading at a premium (last 7 days return is 11% while Nasdaq 100 has moved up by ~1% and currency is almost flat) . While we can compare the ETF price with iNAV and conclude if the ETF is overpriced or not, there no such comparison available for a FoF. A lot of people will be investing in FoF without realising that they are overpaying by around 10% compared to the value of securities held by the FoF.
You have got it reversed. FoF is not trading at premium. FoF doesn’t even trade 
This particular FoF invests in underlying Nasdaq 100 ETF. So as an investment it is only holding ETF units.
As ETF units have started trading at premium, value of holding of FoF has increased and hence the jump in NAV.
You don’t need a separate comparison for this. FoF is investing in ETF → and you know ETF is trading at premium to iNAV, so … it is self evident.
Yes, technically correct as per the fund documents. But as an investor I am not looking to replicate MON100 returns but Nasdaq 100’s return in INR. (And other FoFs / index funds tracking nasdaq 100 offered by other AMCs like Kotak and ICICI are doing just that even for the last 1 week).
No, it is not self evident. FoF can choose to directly purchase new units of the ETF from the fund house instead of buying them at LTP from open market. In such a case even if the LTP is at a premium to iNAV, the FoF would be getting the units at iNAV. Unfortunately for now, since the creation of new units has been stopped, FoF is forced to buy MON100 units at jacked up LTP.
In any case, my point is still that wrt value of Nasdaq 100 holdings, the NAV of the FoF is “quoting” at 10% premium and many investors will not be aware of this. (I did not mean “trading” literally but my apologies if that caused confusion).
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How FOF buys is immaterial in this case.
Even if FOF does not buy any fresh units (assuming there is no infllow), its NAV is still going to go up. Because NAV is calculated at traded price.
FoF hold unit of ETF as its holding. As ETF units price shoots up NAV also shoots up proportionately.
So even if there i no new inflow, NAV will continue to rise in proportion to ETF traded price.
Most likely because thy are not following the ETF route and also in that case they would have stopped taking new subscription.
So it is devil’s choice, if you want to continue investing, buy ETF / FOF at premium or you get a index fund which is tracking well, but not allowing fresh buying.
SEBI has introduced artificial constraint and these are its repercussion.
