Silver ETFs Plunge 18-20% as Leveraged Positions Surge 5x Since December
Silver ETFs crashed 18-20% on January 22 despite stable spot silver prices, as leveraged positions through Margin Trading Facility surged at least 5x since December 1. Nippon Silver ETF leads with ₹1,178 crore in leveraged positions as of January 20. The sell-off occurred despite risk sentiment recovery and strong prior performance, with spot silver up 30% and Nippon Silver ETF up 45% before the decline.
*this image is generated using AI for illustrative purposes only.
Silver Exchange Traded Funds witnessed a dramatic sell-off on January 22, with major ETFs plunging 18-20% at daily lows despite relatively stable global spot silver prices. The sharp decline has been attributed to increased leveraged trading activity through Margin Trading Facility (MTF), which has seen exponential growth since December.
Leveraged Positions Surge Multi-fold
Margin Trading Facility disclosures from the National Stock Exchange reveal a significant jump in leveraged positions on Silver ETFs over the past 38 sessions starting December 1. The data shows market participants have dramatically increased their leveraged exposure to silver-based investment products.
| ETF Performance: | Details |
|---|---|
| Nippon Silver ETF Leveraged Positions: | ₹1,178.00 crore |
| Reporting Date: | January 20 |
| MTF Growth Period: | 38 sessions from December 1 |
| Growth Multiple: | At least 5x |
Nippon AMC Silver ETF currently holds the highest leveraged positions among its peers at ₹1,178.00 crore as per the January 20 NSE disclosure report.
Major ETFs Experience Sharp Decline
Multiple Silver ETFs experienced severe selling pressure during Thursday's trading session, with the decline affecting the entire silver ETF segment. The sell-off occurred despite risk-off sentiments showing signs of recovery in global markets.
| ETF Sell-off Impact: | Performance |
|---|---|
| Nippon Silver ETF: | 18-20% decline at lows |
| Tata Silver ETF: | 18-20% decline at lows |
| HDFC Silver ETF: | 18-20% decline at lows |
| Recovery: | Marginal bounce from daily lows |
The ETFs staged a marginal recovery from their daily lows but remained significantly down for the session.
Market Context and Price Performance
The silver ETF decline presents a notable disconnect from underlying asset performance. Prior to the January 22 trading session, both spot silver prices and ETF performance had shown strong gains.
| Pre-decline Performance: | Returns |
|---|---|
| Spot Silver Prices: | +30.00% |
| Nippon Silver ETF: | +45.00% |
Risk sentiment in global markets showed improvement after Trump reiterated he would not use force for Greenland acquisition and announced he would not implement the threatened 10% tariffs on European allies from February 1.
Industry Concerns Over MTF Growth
Zerodha's Nithin Kamath highlighted concerns about the Margin Trading Facility's rapid expansion in a social media post. According to CNBC-TV18 reports, MTF has grown 5x since the Covid-19 pandemic. Kamath warned that while markets maintain decent liquidity during upward movements, liquidity tends to dry up during drawdowns, potentially leading to synchronized liquidations of leveraged positions during major market corrections.
Market Outlook
The silver ETF sell-off underscores the risks associated with increased leveraged trading in commodity-based investment products. The significant gap between spot silver performance and ETF trading patterns highlights the impact of leveraged positions on price discovery and market volatility in the Exchange Traded Fund segment.
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