Around 17 mutual fund houses, including SBI Mutual Fund, HDFC Mutual Fund, ICICI Prudential Mutual Fund and Kotak Mutual Fund, have temporarily suspended fresh subscriptions to their gold fund of funds (FoFs) from Friday, ahead of the festive season.
The restrictions will remain in force until further notice, according to notices issued by the respective asset management companies (AMCs). Gold FoFs invest in gold exchange-traded funds (ETFs), which hold physical gold, rather than purchasing the metal directly.
The suspension covers fresh lump-sum investments, switch-in transactions and new registrations for systematic investment plans (SIPs) and systematic transfer plans (STPs), among other inflows. Existing investors, however, can continue to redeem their investments, while instalments under already registered SIPs and other eligible systematic plans will continue to be processed.
Surging inflows
The fund houses have not specified the reasons for the restrictions. Market sources, however, point to the surge in investments in gold-backed financial products and the pressure on the rupee as possible factors behind the move.
The Indian currency has weakened by around 7 per cent against the dollar this year, weighed down by higher crude oil prices and foreign investor selling in domestic equities. Gold remains one of India’s largest import items, while investments in gold and silver ETFs have risen sharply.
According to data from the Association of Mutual Funds in India, gold ETFs attracted net inflows of ₹4,450.61 crore in September 2026, up 71 per cent from ₹2,596.70 crore in August.
“On a cumulative basis, Gold ETFs attracted net inflows of approximately ₹45,925 crore during January-September 2026, already surpassing the ₹42,961 crore garnered during the entirety of 2025. The strong collections highlight investors’ growing preference for gold as a strategic portfolio allocation despite elevated valuations and intermittent price volatility,” said Nehal Meshram, senior analyst at Morningstar Investment Research India.
Data from the World Gold Council show that gold demand from ETFs in volume terms stood at 23.5 tonnes during January-June 2026, compared with 9 tonnes in the corresponding period last year. Total holdings rose to 119 tonnes by the end of the second quarter of 2026.
Import concerns
The move comes amid a broader government effort to moderate domestic gold consumption and contain pressure on the country’s import bill.
Earlier this year, the government raised the import duty on gold and silver to 15 per cent from 6 per cent.
This is not the first time fund houses have restricted investments in precious-metal schemes in 2026. In June, several AMCs imposed caps on large investments in gold ETFs and FoFs. Those restrictions were eased in August.
The latest suspension comes ahead of the festive season, when demand for gold typically rises. Market sources said the decisions appear to have been taken independently by the respective AMCs, potentially in anticipation of higher demand for precious metals during the festive period.
Gold ETFs are backed by physical gold held in vaults. A sustained increase in demand for these products can, therefore, translate into additional gold procurement and, depending on sourcing arrangements, higher imports.
By temporarily halting fresh subscriptions to gold FoFs before the seasonal demand peak, fund houses may be seeking to manage inflows. The restrictions could also limit an additional channel through which rising investor appetite for gold feeds into domestic demand for the imported metal.