Kotak Mahindra, UTI and HDFC mutual funds have paused large subscriptions to gold exchange-traded funds after discussions with SEBI, restricting fresh inflows as demand typically rises during Dussehra and Diwali.
Several major Indian mutual funds have paused bulk subscriptions into gold exchange-traded funds, a move taken just as the country moves into the festival season, when buying of the metal typically picks up. According to Reuters, the notices came from fund houses including Kotak Mahindra Mutual Fund, UTI Mutual Fund and HDFC Mutual Fund, and did not explain the change. Investors can still redeem holdings, leaving existing fund outflows intact even as fresh large-scale inflows are restricted.
Reuters reported that the step followed discussions with the Securities and Exchange Board of India, according to a mutual fund executive and two bullion industry officials familiar with the matter. The sources said the move was not framed as a formal ban but as a precautionary measure, with one dealer suggesting it was intended to prevent a jump in imports in October. SEBI did not respond to Reuters outside business hours.
The timing matters because India is heading into Dussehra in October and Diwali in early November, periods when gold purchases are often seen as auspicious and demand usually strengthens. Mint reported that the restrictions come against a backdrop of a weaker rupee and concerns about higher import costs, while officials have also been wary of the impact that heavier gold buying can have on the trade deficit. India remains the world’s largest consumer of silver and the second-largest consumer of gold, and it still depends heavily on imports to meet demand.
There are signs that import activity has already eased from recent months. Reuters said gold imports fell to $1.8 billion in September from $2.3 billion in August, although the seasonal festival period could still bring renewed demand. Outlook Money and the Economic Times have also reported that some asset managers have been tightening access to gold ETFs and related fund-of-fund products more broadly, with Tata Mutual Fund separately imposing limits on fresh subscriptions to its own gold ETF and fund-of-fund schemes. Those reports suggest the latest curbs are part of a wider effort by fund houses to manage flows into paper gold during a volatile period for currencies and bullion.
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