- First, a Quick Recap: How ETFs Trade
- The Problem: A Two-Day-Old Reference Price
- What SEBI Has Changed
- Common Confusion: Is a Dynamic Band the Same as No Limit?
- Things to Keep in Mind
- The Bottom Line
If you have ever bought or sold a Gold ETF or a Nifty ETF on NSE or BSE and noticed the price looked slightly off from what you expected, there is a structural reason for that, and SEBI just changed the rules to fix it. The changes come into effect from September 1, 2026.
Here is what was broken, what has changed, and what it means for you.
First, a Quick Recap: How ETFs Trade
An ETF (Exchange Traded Fund) is a mutual fund that trades live on a stock exchange, just like a share. You can buy and sell it throughout the day at market prices.
Every ETF has an underlying NAV (Net Asset Value), which is the actual value of the assets the fund holds. For a Gold ETF, that's the current price of gold. For a Nifty ETF, that's the value of all 50 Nifty stocks combined.
Ideally, the ETF's market price and its NAV should stay very close to each other throughout the day.
The Problem: A Two-Day-Old Reference Price
Until now, the exchange used the ETF's NAV from two trading days ago (called the T-2 NAV) to set the daily price band, the floor and ceiling within which the ETF was allowed to trade that day.
Here is why that creates a problem.
Say gold rises 4% overnight due to global news. The Gold ETF's real value has moved up by ₹4 per ₹100. But the exchange's reference price is still anchored to NAV from two days ago. The ETF's allowed trading range is calculated off a stale number.
Result: the ETF either gets stuck below its fair price (you sell cheap), or buyers can't access it at fair value (you overpay). The market price and the actual value disconnect, exactly the opposite of what an ETF is supposed to do.
What SEBI Has Changed
Change 1: The reference price is now yesterday's closing price, not T-2 NAV
From September 1, the base price for ETF price bands will be the ETF's T-1 closing price, specifically, the Volume Weighted Average Price (VWAP) of the last 30 minutes of the previous trading session. That is a full day fresher than before.
If there were no trades in the last 30 minutes, the last traded price of the day is used instead. If there were no trades at all that day, the latest available NAV is the fallback.
Change 2: Fixed price bands replaced with dynamic price bands
Under the old rules, most ETFs had a fixed band of ±20% for the entire day. Once the ETF's price hit that wall, trading would freeze, even if the underlying (gold, Nifty) was still moving.
Under the new rules, the band starts tighter and expands as needed:
| ETF Type | Starting Band | Can Expand To |
| Equity & Debt ETFs | ±10% | ±20% (in two steps of 5%) |
| Gold & Silver ETFs | ±6% | Beyond ±9% in 3% steps if global markets move sharply |
| Overnight & Liquid ETFs | ±5% | Fixed, no change |
The expansion happens after a 15-minute cooling-off period. During that period, trading continues within the existing band; it does not halt. If the ETF hits a limit in the last 30 minutes of the trading session, the cooling-off is shortened to just 5 minutes.
Change 3: Pre-open auction for Gold and Silver ETFs
Gold trades globally around the clock. When Indian markets open at 9:15 AM, there is already a price gap between where gold closed on Indian exchanges yesterday and where it is trading internationally right now.
To handle this gap, SEBI is introducing a pre-open call auction for Gold and Silver ETFs, the same mechanism used for regular stocks at market open. This lets buyers and sellers find a fair opening price before continuous trading starts.
Common Confusion: Is a Dynamic Band the Same as No Limit?
No. The band still exists; it just moves in steps rather than being a single hard wall all day. For equity ETFs, it starts at ±10% and can only reach ±20% at most. The band also only flexes in the direction the price is moving. It does not slide on the other side.
Things to Keep in Mind
- The move to T-1 NAV (an even more accurate reference) is planned for April 1, 2027; exchanges and AMCs need more time to set up the systems for that.
- These rules apply to all ETFs traded on Indian exchanges, equity, debt, gold, and silver, but the specific band numbers differ by category.
- For Gold and Silver ETFs, if international markets move sharply overnight beyond the initial 6% band, exchanges can relax limits further, but must inform the market with a public notice and justification.
The Bottom Line
A stale reference price was causing ETF market prices to drift away from their true value, most evident during volatile sessions. SEBI's new rules bring the reference price a full day closer to current reality, replace rigid bands with flexible ones that follow the market, and add a proper price-discovery session for commodity ETFs.
The practical outcome: on the days when you most need to exit or enter an ETF quickly, the price you transact at should be closer to fair value than it was before.