Funds & ETFs

Buying the Nasdaq From India? You Might Be Paying 20 Percent Too Much.

The extra you pay is not the Nasdaq being expensive. It is the ETF being expensive. Here is when that gap opens, and when it collapses on you.

Anand Ganapathy K SEBI RA · INH000016630 17 June 2026

Say you want to own the Nasdaq from India. The easiest way is the popular Nasdaq 100 ETF that trades right there on your exchange, like a stock. In early April 2025 you put a lumpsum in.

7 weeks later, you are down about 20 percent.

The Nasdaq did not fall. It went nowhere for you over those weeks. The loss came from the ETF itself. You had bought it at roughly 20 percent above the value of what it actually held. That extra slowly drained away. By late May 2025 the same ETF was trading slightly below its own holdings. The index was fine. Your entry price was not.

That extra has a name.

First, 2 plain definitions. An ETF is a fund you can buy and sell on the exchange like a share. Its NAV (net asset value) is what one unit is really worth: add up everything the fund holds, divide by the number of units.

Now the gap. This is the premium and discount to NAV. When the ETF's market price sits above its NAV, you are paying a premium. When it sits below, you are getting a discount. Watch how the price floats around the value below.

The headline you keep hearing is true. The India-listed Nasdaq 100 ETF (MON100) often trades at a fat premium. But the headline stops one question short.

Does that premium last, or does it collapse?

It collapses. Again and again. 3 years of daily data say so. And whether the collapse wrecks you or barely touches you comes down to one thing. Not the market. How you buy. Let us walk through it.

Most coverage of the global ETF premium in India stops at "these ETFs trade above NAV" and leaves it there. This piece goes one layer deeper. It works through 3 years of daily price-versus-NAV data on the Nasdaq 100 ETF (MON100) to answer the 2 questions a buyer actually needs settled: first, does an international ETF premium persist or does it collapse, and second, given the answer, should you buy an ETF at a premium or not. Both questions get a plain answer below.

Does the ETF premium to NAV collapse, or stay high?

Here is the premium on that Nasdaq 100 ETF (ticker MON100), month by month, from June 2023 to June 2026.

The bold flat line is zero, the point where price equals NAV. There the fund trades at exactly what it is worth. Above the line is a premium. Below is a discount. Purple shading shows how far the price floated above value. Watch a single marker walk through the spikes.

Notice one habit above all. Every climb toward a 20 percent premium is followed by a fall.

The premium is not a level the fund settles at. It is more like a spring. It coils up, then releases. And on a fair number of months the line even dips below zero, where the fund is briefly cheaper than what it holds.

Read those rows slowly. The average premium was 3.7 percent. The typical day was just 0.7 percent.

On more than a third of all days, the fund sat at par or even at a discount. So the premium keeps pulling back toward zero. It spikes, then deflates. That is the key trait of this fund.

But to trust that the premium will keep pulling back, you need to know why a premium opens at all. So let us look under the hood.

Why does a global ETF in India trade at a premium to NAV?

Think of it as a valve.

An ETF only tracks its NAV as long as the fund house can keep making new units to meet demand. Making a new unit is called creation. For a global ETF, that means one specific thing: the fund house sends fresh money abroad and buys more of the underlying stocks.

As long as that valve is open, the gap stays shut. If the price runs above NAV, big players create cheap units and sell them into the demand. The premium closes. Price and value stay glued together.

Here is the catch. Indian funds that invest overseas all draw from one shared pot, the RBI overseas investment limit set with SEBI. Roughly 7 billion US dollars for the whole industry, with about 1 billion of that reserved for overseas ETFs.

When the industry hits that ceiling, fund houses can no longer send money abroad. So they stop taking fresh money and halt creation. The valve shuts. Watch what happens next.

So with the valve shut, your demand and everyone else's has nowhere to go but the price. You are all bidding for a fixed pool of units. The price pulls away from NAV, and the premium opens up.

Then headroom returns. Some investors sell and free up room, or the regulator raises the cap. Creation switches back on. The arbitrage returns, and the premium gets slammed back toward zero.

That is the collapse. The Nasdaq fund keeps pulling back to NAV because its valve keeps reopening.

Now put yourself in the trade

A row in a table is easy to shrug off. A single trade is not.

Go back to where we started. On 4 April 2025, that Nasdaq 100 ETF traded at roughly a 20 percent premium. Say you put 1 lakh in that day. You paid 1 rupee 20 paise for 80 paise of actual Nasdaq.

By 27 May 2025, 7 weeks later, the same ETF was at a 1 percent discount. The premium had not just shrunk. It had crossed zero and gone negative.

Your 1 lakh was now worth about 80,000. The Nasdaq itself had not moved for you over that stretch. Every rupee of that loss was premium leaking out. The valve had reopened, arbitrage came back, and the air came out of the price. The index was never your problem. The entry was.

And this was not a freak event. The same Nasdaq fund ran from a 20.4 percent premium in late January 2025 to 3.2 percent 5 weeks later. From 16.3 percent in early October 2025 to flat in 2 weeks. From a record 27.7 percent spike in June 2026 it has been unwinding ever since.

Every spike has been followed by a collapse. You do not get to know the day. You only know it comes.

So which buyer are you?

This is where the premium stops being one fact and becomes 2 very different stories, depending on how you buy.

Put 2 versions of yourself on that same premium path. One of you drops a single lumpsum in at the spike. The other buys a fixed amount every month, through the highs, the par days, and the discounts. Watch where each one ends up.

2 buyers, same fund, same path. 2 very different results.

• The lumpsum buyer takes the full hit. You commit at the peak and ride the decay all the way down. That is the 1-lakh-becomes-80,000 trade from earlier. The whole premium is yours to lose.
• The long-term SIP buyer never makes that one bad bet. You buy a fixed sum every month. You pick up units at par, at a discount, and at a premium. Your entry premium averages out across the range. For the Nasdaq fund that average was around 3.7 percent, with a typical month close to zero, far below any spike.

So a SIP does not need you to time anything. It buys at the good prices and the bad ones, and the bad entry stops deciding your outcome.

But do not stretch that into "a SIP makes the premium vanish." It does not. Which brings us to the one thing that changes the answer: the kind of fund you are buying.

Which kind of fund are you buying?

The Nasdaq fund mean-reverts. Its valve keeps reopening, so its premium keeps falling back toward zero. A steady SIP there really does average out near par.

Not every global ETF behaves that way. Meet the second fund.

The Nippon India Hang Seng BeES tracks Hong Kong's Hang Seng index. Same kind of product, very different animal. Its creation window has stayed tight for almost the whole period, so its valve rarely reopens. The premium does not snap back to zero. It just sits there, high. Compare the two lines.

Now the honest part. Even a disciplined monthly SIP into the Hang Seng fund averaged a positive premium near 8.4 percent. The SIP smoothed the swings. It did not erase the baseline premium, because the valve simply never reopened enough.

How to check the premium yourself before you buy

You do not have to take any of this on trust. The numbers are published. The check is simply iNAV versus market price. Here is the 2-minute version before you commit a single rupee.

• Open the AMC's own indicative NAV page. For the Nasdaq 100 ETF that is the Motilal Oswal iNAV page. The iNAV (indicative or intraday NAV) is the fund house's live estimate of what one unit is worth right now.
• Open the live market price next to it: the NSE quote for MON100.
• Compare the 2 numbers. If the price sits well above the iNAV, you are paying a premium. The bigger the gap, the more air you are buying.
• For the official end-of-day value, AMFI publishes the closing NAV after market hours.

So where does this leave you?

The premium is a genuine risk for one kind of buyer and almost a non-issue for the other. Same fund, same premium, 2 outcomes, decided by how you behave. If you take just 4 things away, take these.

• Check the premium before you buy. Put the fund's live price next to its NAV (and its iNAV, if your platform shows it). The number is published. You are not buying blind.
• Never put a lumpsum into a fat premium. When a global ETF trades well above NAV, you are paying for air, and the data says that air leaks out. You can lose 15 to 25 percent to premium decay with the index flat. Wait, or use a different route.
• A SIP rescues you, but it is not magic. Buying steadily across years pulls your entry far below the spike. For a capped fund, your average entry can still be a premium. Useful, not a free pass.
• Match the fund to your behaviour. A fund whose window reopens suits steady buying that rides it back to NAV. A chronically capped fund asks for more patience and a clear head about the standing premium. Read the fund, not just the label.

So, should you buy an ETF trading at a premium?

Here is the short, skimmable version. Same rules apply to any global or international ETF trading above NAV, not just the Nasdaq one.

• Do not put a lumpsum into a global ETF trading at a fat premium. When the price sits well above the fund's iNAV, you are buying air. The data says that air leaks out. You can lose a large part of your money to premium decay even if the index does nothing.
• Use a rough sanity band. Many practitioners treat roughly NAV plus or minus 1 percent as fair. The further above that band the price sits, the more you are overpaying for the same holdings. A wide gap is a reason to slow down, not a reason to rush in.
• For a long-term monthly SIP, the premium matters far less. You buy across the full range over time, so a single bad entry stops deciding your outcome. But know the fund. A fund whose creation valve keeps reopening, like the Nasdaq one, pulls back toward NAV. A chronically capped fund can keep you above NAV on average even with a steady SIP.
• Always check the live price against the iNAV before you place the order. If the gap is wide, wait for it to narrow, or take the exposure through the index fund or fund-of-fund route instead, where you transact at NAV rather than at an on-exchange premium.

Common questions

Why do global ETFs in India trade at a premium to NAV?

Indian funds that invest abroad share one RBI overseas investment limit, roughly 7 billion US dollars for the industry, with about 1 billion reserved for overseas ETFs. When that ceiling is hit, fund houses halt creation of new units, so on-exchange demand pushes the price above NAV and a premium opens.

Do these ETF premiums collapse, or do they stay high?

It depends on the fund. The Nasdaq 100 ETF (MON100) premium mean-reverts: it spikes when creation halts, then collapses back toward NAV when the window reopens. A chronically capped fund, like a Hang Seng ETF, can hold a standing premium for long stretches because its creation window rarely reopens.

Should I buy an ETF that is trading at a premium?

Avoid putting a lumpsum into an ETF trading at a fat premium, because you can lose a large part of it to premium decay even if the index does nothing. If you invest through a long-term monthly SIP, the premium matters far less because you buy across the full range over time. Always check the gap first.

How do I check an ETF's premium before I buy?

Compare the live market price to the fund's iNAV on the AMC page, then to the end-of-day NAV that AMFI publishes. If the price sits well above the iNAV, you are paying a premium, and the wider the gap, the more you are overpaying for the same holdings.

Is a SIP into a premium ETF safe?

A SIP rescues you from the worst case, a lumpsum dropped at a spike, because it averages your entry across high, fair, and discount days. It does not erase the premium. For a chronically capped fund, your average entry can still be a premium, so know which kind of fund you are buying.

What is the RBI limit that causes the premium?

It is the RBI overseas investment ceiling for Indian mutual funds, roughly 7 billion US dollars across the industry, with about 1 billion of that set aside for overseas ETFs. When the industry uses up that headroom, fresh creation stops, and that is what lets the premium open.

A fair word on the numbers

One honest caveat, so you can trust the rest.

The premium here is the exchange's closing price against the end-of-day NAV that AMFI publishes. The cleanest measure would be the live iNAV, but its history is not archived. So a 3-year study has to use end-of-day NAV.

That adds a small wrinkle. AMFI strikes an international fund's NAV off the previous foreign session. So a few percent of the daily wiggle is just a timezone lag, not a real gap.

It is worth knowing, and it changes nothing here. A couple of percent of noise cannot explain spikes of 15 to 27 points. Those spikes are the real creation-halt premium, and they are what collapses.

One last thing, because it is easy to walk away with the wrong feeling. The premium is not a scam, and it is not free money either. It is just the price of a temporary shortage, and that shortage is set by a regulatory window you do not control.

Global exposure is not a trap. The premium is simply a cost that, unlike most costs, you can actually see. So look at it before you buy, know which kind of fund you are holding, and never hand over a lumpsum at the top of a spike. Do that, and the gap that quietly costs other people about 20 percent of their money is, for you, just a number you checked.

Anand Ganapathy K | SEBI Registered Research Analyst | INH000016630