ETFs trading at abnormal prices due to high volatility: Check this before investing in mutual fund ETF to prevent avoidable loss

economictimes.indiatimes.com:

stock market was also impacted as it descended into panic buying and selling, leading to heightened volatility. While share prices can be easily figured out on real time basis, it becomes difficult to do so when it comes to ETF trading on stock exchanges. Many investors unaware of the impact of high volatility on their investment ended up losing money or unexpected gain.

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As per ET's report, on June 4, 2024, the Indian stock market experienced a very heavy buoyancy as the Nifty 50 index was down by up to 8.5% on an intraday basis. On June 5, 2024, the Nifty 50 index went up by 3.36%. These fluctuations in value of indexes like Nifty 50 and others caused prices of most ETFs to go haywire and thus were either trading at a huge premium or discount to its indicative NAV (iNAV).

What went wrong on June 4, 2024, and June 5, 2024 with ETFs?

As per a head of passive investments of a mutual fund house, Indian stock market was not ready for such a big volatility and thus the NAV of ETFs varied from their iNAV price by a big margin.

Zerodha said on X (formerly Twitter) on June 5, 2024, «Many ETFs seem to be trading at a big premium or discount to their benchmark. Please keep these things in mind before buying and selling ETFs. Whenever there are sharp moves in the markets, ETFs can trade at abnormal premiums or