Mutual Funds Halt Fresh Inflows into Gold ETF FoFs Ahead of Festive Demand — October 25, 2026

Ahead of peak festive season demand around Dhanteras and Diwali, nearly 20 asset management companies across India have temporarily suspended fresh subscriptions in their Gold ETF Fund of Funds (FoFs). The move follows instructions from the Securities and Exchange Board of India (SEBI), communicated through the Association of Mutual Funds in India (AMFI), aimed at curbing a spike in institutional bullion purchases that could pressure the Indian rupee and widen the current account deficit.

Leading fund houses—including HDFC Mutual Fund, ICICI Prudential AMC, SBI Funds Management, Kotak Mahindra Mutual Fund, Tata Mutual Fund, and DSP Mutual Fund—issued addenda notifying investors of the pause.

Scope of the Suspension

The restrictions apply strictly to indirect mutual fund routes and do not close off gold exposure entirely. Mutual fund houses have outlined specific transaction limits:

• Disallowed Transactions: Fresh and additional lump-sum investments, new Systematic Investment Plan (SIP) registrations, new Systematic Transfer Plan (STP) inflows, switch-ins from other schemes, and SIP top-ups or step-up facilities.
• Allowed Transactions: Existing SIP and STP instalments registered before the cut-off dates continue to be processed at prevailing Net Asset Values (NAVs) without interruption.
• Exits Unaffected: Redemptions, switch-outs, and Systematic Withdrawal Plans (SWPs) remain fully operational, ensuring unitholders retain full liquidity.

Macroeconomic Drivers Behind the Regulatory Curb

A gold ETF FoF functions as a feeder vehicle, deploying collected funds directly into underlying exchange-traded funds. In turn, asset managers must purchase domestic physical bullion to create new ETF units.

In September, gold ETFs attracted net inflows of ₹4,451 crore—a 71.4% jump over August—driven by market volatility and pre-festive accumulation. Because India relies almost entirely on imports to satisfy domestic bullion requirements, surging institutional demand generates foreign currency outflows. The regulatory curb seeks to moderate unnecessary speculative rushes and ease the import bill without freezing capital markets.

Alternative Routes for Indian Investors

With fresh FoF allocations paused, investors looking to rebalance portfolios or accumulate gold have several viable options:

1. Direct Gold ETFs on Exchanges Direct gold exchange-traded funds remain actively traded on the National Stock Exchange (NSE) and BSE. Investors with demat and trading accounts can buy units directly on the market. Buyers should check the indicative NAV (iNAV) before placing orders to ensure they do not purchase units at elevated intraday premiums.

2. Sovereign Gold Bonds via Secondary Markets While the Reserve Bank of India has not issued new primary tranches in recent months, existing Sovereign Gold Bonds (SGBs) can be purchased on stock exchanges. Investors should note that secondary-market purchases held to redemption may attract a 12.5% long-term capital gains tax under updated fiscal provisions, aligning them more closely with other financial bullion instruments.

3. Maintaining Pre-Existing SIPs Investors with active mandates in Gold FoFs do not need to alter their allocations. Because regular automated deductions remain active, dollar-cost averaging can continue uninterrupted.

Financial advisers emphasize that retail investors should avoid panic buying or chasing physical bullion at high local premiums simply due to mutual fund FoF closures, suggesting instead that individuals stick to disciplined asset allocation targets of 5% to 10% in gold.

Tags: SEBI AMFI HDFC Mutual Fund ICICI Prudential AMC Gold ETF Gold FoF