Around 17 mutual fund houses have announced temporary restrictions on new subscriptions in gold ETF Fund of Funds (FoFs) effective October 16, 2026. The latest addition includes The Wealth Company Mutual Fund, bringing the total to 17 fund houses participating in this coordinated industry response. This includes major fund houses such as HDFC, Kotak, ICICI Prudential, DSP, Tata, Aditya Birla Sun Life, Zerodha, Groww, Axis, HSBC, Invesco, Nippon India, Quantum, Mirae Asset, LIC, UTI, and Kotak Mahindra. The suspension represents a significant industry response to seasonal market dynamics, with fund houses aligning their operations with directions from the Securities and Exchange Board of India (SEBI) and the Association of Mutual Funds in India (AMFI). The restrictions come ahead of the festive season when gold demand typically increases as consumers buy the yellow metal on Dussehra and Diwali, which are considered auspicious occasions for gold purchases.
The suspension specifically affects fresh lumpsum transactions, SIP subscriptions, STP subscriptions and switch-ins in gold ETF FoFs across the industry. As reported by multiple fund houses, Zerodha Mutual Fund has clarified that fresh/additional lump-sum subscriptions, including switch ins from other schemes, shall not be accepted. Similarly, Groww Mutual Fund mentioned that these restrictions are temporary in nature and shall remain in force until further notice. Shriram Mutual Fund stated that restrictions were imposed based on SEBI's instructions relayed through AMFI, while Axis Mutual Fund announced a temporary suspension of specified transactions in Axis Gold and Silver Passive FoF from the cut-off time of 3 pm on October 16. The latest addition is The Wealth Company Mutual Fund, which has temporarily suspended fresh lumpsum transactions, Systematic Investment Plan (SIP)/ Systematic Transfer Plan (STP) subscriptions and switch-ins in its The Wealth Company Gold ETF FoF, effective October 16, 2026. These restrictions apply uniformly across the affected fund houses, with HDFC Mutual Fund communicating that new subscriptions and switch-ins have been suspended, while Shriram Mutual Fund stated that restrictions were imposed based on SEBI's instructions relayed through AMFI. Some fund houses have also announced similar restrictions on silver FoF investments. However, silver funds and gold ETFs remain open, with experts noting that gold ETFs are about 34% of the industry's gold assets, with the remaining 66% in ETFs.
Despite the suspension of new subscriptions, 17 mutual fund houses have confirmed that existing investor transactions will continue to operate normally. According to multiple fund house communications, current redemptions and systematic transactions will continue unaffected. Kotak Mahindra Asset Management Company emphasized that existing systematic investments registered before October 16 will continue unaffected, while Axis Mutual Fund clarified that instalments under already registered SIPs and other eligible systematic investment plans will continue to be processed. Zerodha Mutual Fund specifically noted that during this suspension period, redemption, SWP, Switch out and STP-out will continue. The latest addition, The Wealth Company Mutual Fund, confirms that the restriction does not affect existing SIP/STP transactions registered prior to effective date, which will continue to process as usual. This distinction ensures that current investors' ongoing transactions are not disrupted by the temporary suspension, with fund houses emphasizing that the restrictions are temporary without specifying an end date. Investors should check their scheme's notice for precise restrictions, including those on top-ups and modifications to existing plans. However, investors seeking fresh exposure to gold ETFs will have to take the demat route, as ETFs remain open for investments, which could inconvenience retail investors who prefer FoFs because they do not require a demat account.
The suspension comes amid significant market movements, with gold ETFs attracting net inflows of ₹8,606 crore in the September quarter, representing a 49% increase from ₹5,759 crore in the June quarter. As per The Hindu BusinessLine, gold ETF assets increased 9% to ₹1.86 lakh crore against ₹1.70 lakh crore in the June quarter. Silver premiums have widened significantly, with Akshat Garg, Head of Research & Product at Choice Wealth, noting that the silver premium was near 0.5% in early September but had widened to roughly 5-10% by the second week of October at several houses. Prithviraj Kothari, President of the India Bullion and Jewellers Association and Managing Director at RiddiSiddhi Bullions, explained that gold is one of India's biggest imports and the rupee touched about 96.7 to the dollar on October 9. Eshaan Lazarus, Founder and CEO of 021 Trade, revealed that in FY2025-26, gold imports stood at about $72 billion against $12 billion for silver, while during April-September 2026, gold imports were $19.27 billion and silver imports $2.40 billion. Harsh Soni, Founder of NYVO Money, pointed to additional pressures including rupee depreciation and Brent crude prices remaining above $105 a barrel. Industry officials estimate that FoFs account for roughly a quarter to a third of flows into gold ETF inflows, although the share varies across fund houses.
Despite the suspension of fresh FoF subscriptions, experts recommend that an ETF is the preferred route of investment as it is cheaper than a FoF for an investor, whether buying gold or silver. Harsha Vardhana VM, Founder-Group CEO, Atom Financial Services, suggested around 10-15% in gold for most portfolios and silver ETFs could be an optional 3-5% allocation for investors comfortable with higher volatility. Amol Joshi, founder of PlanRupee Investment Services, noted that "An ETF generally has a lower expense ratio than an FoF, but brokerage and demat account charges can reduce that saving for small investors." Rishit Shah, cofounder of Vitta Mitra LLP, described the restrictions as precautionary measures to manage import pressure, stating "This is one of the precautionary measures that help the government manage import pressure." Sunil Subramaniam, founder of Sense and Simplicity, explained that fresh inflows that lead to the creation of additional ETF units can increase demand for physical gold, while Rishit Shah expects the curbs to extend beyond Diwali, depending on crude oil price movements rather than the festival calendar. Aarav Bafna, Director at Akoirah by Augmont, highlighted that the lasting answer solution to investment in gold and managing imports lies in recycling, noting that households hold an estimated 25,000 tonnes, yet recycling supplies only about 16% of the market. Gold ETFs and FoFs returned an average of 16.87% over the past year, with their three-year compound annual growth rate at 35.19%, according to Value Research data.
