HDFC MF’s move alone is unlikely to significantly alter industry flows unless other large gold ETF players follow suit
Summary
HDFC MF’s move alone is unlikely to significantly alter industry flows unless other large gold ETF players follow suit
India’s largest gold ETF managers are putting brakes on fresh inflows into their gold investment products, a move that industry experts said is aimed at slowing inflows from corporate treasuries rather than deterring retail participation.
ICICI Prudential Mutual, which has one of the largest gold ETFs, said it will not accept direct transactions from large investors, mainly institutional investors investing ₹25 crore or more in the gold ETF, as per an addendum by the mutual fund.
Nippon India Mutual Fund has followed suit. It has restricted lump-sum investments in its gold fund of fund (FoF) to ₹10 lakh per individual per month and capped investments through systematic investment plans (SIPs) and systematic transfer plans (STPs) in its gold savings fund and gold ETF FoF at ₹50,000 per PAN per day.
The announcements from both the mutual funds came after HDFC Mutual Fund, in a release on Thursday, announced similar steps.
Kotak Mahindra Mutual Fund is also planning similar moves, industry officials told Mint.
Nippon India, ICICI Prudential, HDFC, and Kotak Mahindra mutual funds manage ₹55,540 crore, ₹26,381 crore, ₹23,239 crore, and ₹14,340 crore in gold ETF assets, per Value Research.
Industry experts said the focus is on large institutional subscriptions made directly with the asset management company (AMC), where investments can run into crores of rupees.
Such flows matter because corporate investors account for a significant share of gold ETF assets. As of March-end, corporates held 58% of the industry’s gold ETF assets, amounting to ₹99,089 crore, according to Association of Mutual Funds in India (AMFI) data.
“For large family offices seeking gold exposure, ETFs are often a preferred route over buying physical bullion. There are enough institutional investors capable of deploying ₹25 crore or more,” said Srikanth Meenakshi, founding partner at Primeinvestor, a mutual fund research platform.
In its communication, HDFC Mutual Fund said the decision was taken in view of broader economic and market conditions.
However unlike restrictions imposed by several silver funds last year during Diwali, due to difficulties sourcing physical silver, bullion dealers told Mint that gold availability remains comfortable, with no significant procurement challenges reported in recent weeks.
“We are not facing any issues with sourcing gold currently,” said Surendra Mehta, National Secretary at India Bullion and Jewellers Association Ltd. (IBJA)
“The measures imposed by mutual funds is a precautionary measure because if tomorrow the centre applies a restriction on gold imports, a mutual fund would not want to sit on large pools of money and have no end product,” said an industry official.
Historically, mutual funds have restricted inflows for specific reasons such as stretched valuations, excessive scheme size, or concerns over investors chasing returns, said Santosh Joseph, founder at Germinate Investor Services.
“The restriction applies only to a small number of investors and it is not something that the average investor needs to worry about. If fund houses had stopped accepting lump-sum investments altogether or restricted SIPs, that would have been a bigger signal of a problem,” said Joseph.
Emails sent to HDFC Mutual Fund, Nippon India Mutual Fund, and ICICI Prudential Mutual Fund, and Kotak Mahindra Mutual Fund remained unanswered till press time.
While some mutual funds are looking at putting restrictions on flows into gold ETFs, some are testing the waters.
DSP Mutual Fund is closely monitoring developments, “but does not currently see any need for similar restrictions,” said Anil Ghelani, head of passive investment and products at DSP Investment Managers.
Investors who buy ETF units on stock exchanges can continue to do so without any such limits. The ₹25 crore restriction applies only to large investors subscribing directly with the AMC.
Similarly, while lump-sum investments in the gold FoF are capped at ₹10 lakh per month, investors can still buy larger quantities of the underlying gold ETF on the exchange. For instance, an investor looking to deploy ₹20 lakh can purchase gold ETF units directly, rather than investing through the FoF route.
Prime Minister Narendra Modi last month urged investors to postpone gold purchases, noting that India imports nearly 90% of the gold it consumes. Higher gold imports increase the country’s import bill and put pressure on the rupee.
India’s gold imports rose 24% to a record $71.98 billion in 2025-26, up from $58 billion in 2024-25. Gold imports were $45.54 billion in 2023-24 and $35 billion in 2022-23, highlighting the sharp rise in the country’s dependence on imported gold.
The Centre has also increased customs duty on gold to 15% to make gold purchases expensive for investors.s.
