In the last few days, we all saw that upper circuits were marked in MAFANG ETF. We have seen the upper circuit in stock many times, but the upper circuit in an ETF is a big deal in itself.
Because ETF can increase only by two to three percent in a day, then why is the upper circuit being imposed? Demand and supply are the main reasons for the upper circuit in MAFANG ETF.
Let us understand in today’s article why the effect of demand and supply is affecting this ETF, due to which an upper circuit is imposed.
Where is your investment made from MAFANG ETF?
MAFANG ETF is Motilal Oswal’s product. Through this ETF, you invest in the top 10 most prestigious and popular companies in America whose names are as follows.
| COMPANY | SECTOR | ASSET(%) |
|---|---|---|
| NVIDIA Corporation (USA) | Capital Goods | 14.17 |
| Meta Platforms | Services | 12.61 |
| NetFlix Inc. (USA) | Services | 10.82 |
| Broadcom Corporation (USA) | Capital Goods | 10.28 |
| Amazon. com Inc. (USA) | Services | 10.23 |
| Microsoft Corporation (US) | Technology | 9.51 |
| Alphabet Inc Class A | Services | 8.99 |
| Snowflake | Technology | 8.25 |
| Apple Inc. (USA) | Consumer Discretionary | 7.86 |
| Tesla | Automobile | 7.26 |
The most amazing thing about this ETF is that you can invest in these 10 best companies in America through any Indian Demat account while sitting in India.
What is the reason for the upper circuit in the MAFANG ETF?
As we know SEBI has made rules in the Indian Stock Market and the stock market has to work based on these rules.
One of these rules is that if you have to invest in markets outside India, then a limit has been created for it.
This limit means that SEBI has decided that only a limited amount can be invested by any institution or individual investor in the stock market of any foreign country.
MAFANG ETF invests in 10 American companies and the limit of this ETF has been reached. This means that investors have bought its maximum shares, and now there are no more shares to sell in this ETF.
When the people who have bought these shares hold the shares, an upper circuit occurs in it, and as soon as any buyer sells his shares, an upper circuit is released.
This situation is called demand and supply error. This means there is not as much supply of MAFANG ETF Shares as the demand for this ETF Share has increased.
What is the limit for investing money in the foreign stock market?
- Under the Liberalized Remittance Scheme, an individual Indian investor can buy stocks worth $250,000 annually in the outside market of India.
- SEBI has been permitted to invest 7 billion dollars in mutual fund investment in the outside market.
- Investment in foreign market ETFs, SEBI has kept its limit at $1 billion.
Will upper circuits continue to be marked in MAFANG ETF?
This situation depends on many factors. If this ETF alias increases the limit for outside investment then this problem can be solved.
Now many factors will be involved in increasing this limit such as either Motilal Oswal can further increase his funds by talking to some other ETF company or SEBI may increase ETF investment from India by bringing some changes in its rules.
Conclusion
In this article, we have discussed these topics.
- Upper circuits are continuously taking place in the MAFANG ETF.
- What is the reason why upper circuits are being seen again and again in MAFANG ETF?
- What rules have SEBI made for investment outside of the Indian market?
- What is the investment limit set by SEBI for an individual investor, mutual funds, and ETFs?
- If the problem of the upper circuit from the MAFANG ETF is to be removed then what can be the solutions for it?