HDFC Mutual Fund has become the first major asset manager to restrict large subscriptions into gold-linked mutual fund schemes, with the latest measures taking effect from market close on June 5, 2026. According to The Times of India, HDFC MF has announced that investments of ₹25 crore and above in its Gold ETF will not be accepted from June 8, with the restrictions applying to transactions received after 3 p.m. on June 5. The fund house has also imposed limits on investments in its Gold ETF Fund of Fund, with lump-sum subscriptions capped and monthly investments restricted to ₹10 lakh. This follows similar restrictions by Nippon India Mutual Fund, which imposed temporary restrictions on large subscriptions into its flagship gold schemes, with direct subscriptions of more than ₹25 crore in Nippon India ETF Gold BeES not being accepted. The fund house has also capped lump sum investments in Nippon India Gold Savings Fund at ₹10 lakh per PAN per month, while SIP and STP investments have been restricted to ₹50,000 per PAN per day. As per The Times of India, three large fund houses--HDFC MF, ICICI Prudential MF and Nippon India MF--have restricted large inflows into gold funds, with the decisions implemented between June 5 and June 8. Kotak Mutual Fund has also limited large lump-sum investments into Kotak Gold ETF from June 8, while ICICI Prudential Mutual Fund has imposed a similar ₹25 crore limit on direct subscriptions into ICICI Prudential Gold ETF.
The restriction by HDFC Mutual Fund follows a similar pattern seen in the mutual fund industry, where fund houses are increasingly limiting direct gold ETF investments for high-value investors. According to Essential Business Intelligence, this trend suggests a systematic approach by mutual fund houses to manage risk exposure in the gold ETF segment. Industry sources indicate that several leading asset management companies are considering similar measures to manage large-ticket inflows. The policy change reflects the industry's response to evolving market conditions and investor behavior patterns in precious metals investments, with HDFC Mutual Fund CEO Navneet Munot stating the decision is linked to concerns around precious metal imports and their implications for India's external account. HDFC Asset Management Company had previously announced plans to withdraw their NFO for their Gold and Silver Passive FOF post PM Modi's austerity measures announcement, with the AMC stating these decisions come amid a broader debate over the role of gold in household savings and an uncertain near-term outlook for bullion prices.
The latest measures are driven by record-high gold ETF inflows amid a weakening rupee and rising import costs. As per Mint, the rupee touched a record low of ₹96.35 against the US dollar in May 2026, making it one of Asia's weakest-performing major currencies this year. Foreign portfolio investors have withdrawn roughly ₹2.63 lakh crore from Indian markets in 2026, adding pressure on external balances. India's gold import bill has expanded sharply, with gold imports rising to nearly $72 billion in FY26, up about 58% compared to two years ago, making gold India's second-largest import category after crude oil. Unlike equity funds, gold ETFs cannot deploy inflows into financial assets - every unit created must be backed by physical gold, requiring fund houses to acquire additional bullion using US dollars. The government raised the effective import duty on gold from 6% to 15%, reversing much of the duty relief announced in July 2024, while uncertainty surrounding indirect tax treatment has disrupted traditional supply channels.
The timing of restrictions coincides with gold ETFs witnessing their strongest quarter on record during March 2026, attracting around ₹31,600 crore of net inflows. According to Mint, demand has been driven by geopolitical uncertainty, currency weakness and strong gains in gold prices. However, rising institutional demand for imported gold increases demand for dollars, adding pressure on the currency. Under normal circumstances, fund houses would create additional units and purchase more gold, but the economics of gold imports have changed significantly in recent months. The result is a mismatch between demand and supply, with accepting large inflows potentially forcing fund houses to acquire gold at elevated costs or temporarily hold cash until bullion becomes available. As per Mint, the restrictions do not affect existing investors - redemptions remain open and SIP investments continue as usual.
