New Delhi, June 17 -- A retail investor buying an exchange-traded fund (ETF) during a volatile trading session could end up paying a price that had little connection with where the underlying market was actually trading.

That's because India's ETF market has long operated with price bands linked to valuations that were already two trading days old. The disconnect became particularly evident during recent episodes in gold and silver ETFs, where market prices diverged sharply from the value of the underlying assets.

The Securities and Exchange Board of India (Sebi) is now attempting to close that gap. From 1 September, ETF price bands will be determined using the previous day's closing market price instead of a T-2 NAV-based reference. Th...