Market dynamics for Exchange Traded Funds (ETFs) in India are set for a regulatory overhaul as Sebi moves to tighten price discovery and curb volatility. Following a surge in the ETF market—which reached approximately **8.5 trillion INR** in assets by mid-2025—the regulator has issued a consultation paper to address widening gaps between market prices and underlying asset values. Current rules rely on a **T-2 day closing Net Asset Value (NAV)** to set the base price for the trading day. This creates a significant lag, especially during periods of high volatility. To resolve this, Sebi proposes shifting to **T-1 day data**, utilizing either the closing price from the previous session, the average indicative NAV (iNAV) of the last 30 minutes, or the previous day’s closing NAV. The move aims to eliminate manual errors associated with adjusting for corporate actions like dividends and bonuses, which are currently handled manually on outdated data. For investors, the most visible change will be the introduction of dynamic price bands. While most equity and debt ETFs currently operate within a fixed **20%** band, the new framework suggests an initial **10%** limit. This band can be "flexed" up to **20%** following a **15-minute cooling-off period**, with a maximum of two such expansions per day. Commodity ETFs, specifically gold and silver, face even tighter initial controls. Sebi proposes an initial price band of **6%**, which can be expanded in increments of **3%** up to a **20%** limit. This proposal follows extreme volatility in late January 2026, where domestic gold and silver prices saw sharp swings that traditional bands struggled to contain. On February 16, 2026, silver ETFs recorded significant drops of up to **7%** as investors booked profits. To further refine discovery for these global assets, the regulator is weighing a separate **pre-open session** for commodity ETFs. This would allow the market to establish an equilibrium price before the standard trading session begins, aligning domestic prices with international movements that occur outside Indian market hours. Public feedback on these proposals is open until **March 6, 2026**. If implemented, these shifts will bring ETF trading closer to the real-time efficiency of individual stocks, providing a more transparent environment for the **5.2 million** and growing retail ETF portfolios in the country.