Motilal Oswal Nasdaq Q50 ETF trades at more than twice the value of its stocks

The Motilal Oswal Nasdaq Q50 ETF closed on Friday, October 9, at 252.03 rupees a unit on the National Stock Exchange of India, 104% above the fund's published net asset value of 123.83 rupees.

That price is Friday's close in Mumbai. The 123.83 rupees is the net asset value published for the fund for the same date, the value of the assets behind each unit. During the Mumbai session, Motilal Oswal's indicative value only adjusts the previous day's closing net asset value for the move in the rupee.

The fund holds the stocks in the Nasdaq Q-50 index, the 50 largest Nasdaq-listed non-financial companies outside the Nasdaq-100, the names next in line for that index. A buyer at Friday's close paid a bit more than two rupees for every rupee of those stocks.

An exchange-traded fund is built not to let a gap like that stand. If the share price rises above the assets, an authorized participant can deliver the underlying stocks, take new shares, and sell them. That is a firm the fund has appointed, not just any trading firm.

The extra supply pulls the price back. Retiring shares does the reverse when the price is too low. The screen stays close to the assets because shares can be made and destroyed.

They cannot be made here, and that did not begin on September 25. On that day the National Stock Exchange said the overseas investment limits available to mutual funds are fully used, and that creation of fresh units in these international funds is restricted. The exchange was reporting a limit already used up, not the day it ran out.

The Hindu BusinessLine was still treating that limit as in force this weekend. With no new shares coming, buyers are bidding for the units that already exist.

The daily limit follows yesterday's traded price

On June 15, 2026, the Securities and Exchange Board of India, the market regulator, changed how an ETF's daily price band is set. The rules took effect on September 7. Until then, the band was measured from the net asset value of two days earlier.

The base is now one price: the average price of trades in the last 30 minutes of the previous session, weighted by how many units traded. For an equity fund the band starts at 10% either side of that price.

If the price hits the edge, a cooling-off period, a set wait, has to run before the band can widen. The band can then widen in steps of 5 percentage points, up to 20%, and no more than twice in one direction.

The band moves with yesterday's traded price. It does not reset to the value of the stocks. The gap, a premium, can travel from one session into the next, and widen, without breaking the rule.

From April 1, 2027, the base changes again. It becomes the previous day's closing net asset value, yesterday's value of the stocks, rather than yesterday's traded price. That is a fresh net asset value, not the two-day-old one used before September.

The premium is not the same everywhere

The Hindu BusinessLine, in an analysis published this weekend, looked at six international ETFs over 21 trading sessions in the past month. The Mirae Asset S&P 500 Top 50 ETF averaged a 49% premium, and peaked at 83%. The Mirae Asset NYSE FANG+ ETF averaged 35%, the Mirae Asset Hang Seng TECH ETF 24%, and the Motilal Oswal Nasdaq 100 ETF 17%.

The Nippon India ETF Hang Seng BeES averaged 3%. It is an overseas fund in the same set, and the gap was nothing like the others.

BusinessLine estimated that these six funds, the five just named and the Q50 fund, had combined turnover of 104.4 billion rupees on the National Stock Exchange and the BSE, the country's other main exchange, so far in 2026. Nearly 30% of that turnover, 30.94 billion rupees, was in trades struck above net asset value.

The Q50 fund is the far end of the range. BusinessLine put its September 18 market price at 396.30 rupees, against a net asset value of 118.14 rupees, a premium of 235%.

The price then fell to about 188 rupees on September 28, BusinessLine reported, and by Friday the close was back at 252.03 rupees. The fund's net asset value was 118.14 rupees on September 18 and 123.83 on Friday.

The premium narrowed as the share price fell, then widened again as it climbed. The value of the stocks barely moved.

What a holder is exposed to

If you are about to buy an overseas fund on an Indian exchange, set the price on the screen next to the net asset value before you send the order. The National Stock Exchange attributes the gap to the restricted creation of new units.

If you already hold the units, you are holding the premium. The late-September fall in the share price has already partly reversed.

In its September 25 notice, the exchange warned of an abrupt fall in price, unrelated to the underlying stocks, if the overseas limits are raised or when the band switches to the previous day's closing net asset value on April 1, 2027. That risk sits with the units already in the market.