Summary of this article
17 mutual fund houses have temporarily restricted fresh gold ETF FoF investments
Redemptions and instalments under existing SIPs and STPs will continue
Gold ETF inflows rose 71.4 per cent to Rs 4,450.61 crore in September
As many as 17 mutual fund houses have temporarily suspended fresh investments in their gold exchange-traded fund (ETF) funds of funds (FoFs), with the restrictions taking effect on October 15 and 16. The fund houses informed investors about the move through notices-cum-addenda but did not specify the reasons for the suspension.
Redemptions, systematic withdrawal plans (SWPs), switch-outs and systematic transfer plan (STP) outflows will continue during the suspension period, according to the notices.
Tata Mutual Fund said fresh and additional lump-sum investments, switch-ins, top-ups, and new systematic investment plan (SIP) and STP registrations in Tata Gold ETF FoF would be temporarily restricted from October 16, 2026.
“Please note that during this suspension period, Redemptions, Switch-out, existing Systematic Withdrawal Plan (SWP) will continue to be permitted in accordance with the terms outlined in the Scheme Information Document,” the fund house said in its notice.
The fund house added that the suspension was temporary and would remain in place until further notice. Instalments under existing SIP and STP registrations made before the effective date will continue to be processed at the applicable net asset value (NAV).
According to a Reuters report, the notices from the fund houses, including Kotak Mahindra Mutual Fund, UTI Mutual Fund and HDFC Mutual Fund, did not cite a reason for the move. There is no restriction on redemptions from these funds.
The report added that the decision followed a nudge from the Securities and Exchange Board of India (Sebi), citing a mutual fund executive familiar with the discussions. Two bullion industry officials also confirmed to Reuters that the suspension followed discussions with the market regulator.
The restrictions come at a time when India is trying to contain pressure on its external balances and the rupee. Higher global oil prices have increased the country's import bill, while heavy selling by foreign investors in Indian equities has added to the currency's weakness. Strong gold demand has also contributed to pressure on the rupee, prompting the government to raise import duties on gold and silver earlier this year.
India depends heavily on imports to meet domestic demand for gold, with the jewellery industry accounting for a significant share of consumption. The country is the world's second-largest consumer of gold after China. High import dependence means a surge in gold purchases can widen the trade deficit and put further pressure on the rupee.
Gold imports fell 81.27 per cent year-on-year to $1.8 billion in September, contracting for the second consecutive month following a sharp increase in customs duty on the precious metal, according to Ministry of Commerce data. Gold accounts for more than 5 per cent of India's total imports. The government raised import duty on gold and silver from 6 per cent to 15 per cent with effect from May 13.
Earlier this year, Prime Minister Narendra Modi has also urged people to defer gold purchases amid the West Asia crisis, which has disrupted global supply chains and economic activity.
Despite the fall in imports, gold ETFs have attracted stronger investor inflows. According to data from the Association of Mutual Funds in India (Amfi), gold ETFs recorded net inflows of Rs 4,450.61 crore in September, up 71.4 per cent from Rs 2,596.70 crore in August.
