Several large Indian mutual funds have suspended bulk subscriptions to gold exchange-traded funds (ETFs) ahead of the festive season, when demand for the precious metal typically rises. Redemptions from these funds remain open, reported news agency Reuters.
Kotak Mahindra , UTI Mutual Fund and HDFC Mutual Fund were among the fund houses that issued public notices late Thursday announcing the suspension. The notices did not specify a reason for the decision.
The move followed a nudge from the Securities and Exchange Board of India (Sebi), according to a mutual fund executive familiar with the discussions. Two bullion industry officials also told Reuters that the halt followed discussions with the market regulator. Sebi had not responded to a request for comment at the time of publication.
The suspension comes ahead of Dussehra and Diwali, when buying is considered auspicious and demand for jewellery and investment products typically rises. Investors can still redeem their existing gold ETF holdings, and the notices do not indicate a blanket ban on retail investors buying gold.
Gold ETFs allow investors to gain exposure to gold through units traded on the stock exchange, without having to buy and store jewellery or coins themselves. These funds are backed by physical gold held by the fund.
Bulk subscriptions refer to large investments into these schemes. Suspending such subscriptions can limit fresh money entering the affected funds through that route, although the precise scope of the restrictions will depend on the terms set out by each fund house.
The notices do not state that existing investors must sell their units. Redemptions remain available, meaning investors can continue to withdraw from their holdings, subject to the applicable scheme terms.
The move comes at a time when gold prices have fallen in recent sessions. The indicative domestic price of 24-carat gold was around Rs 1.48 lakh per 10 grams on October 15, down from around Rs 1.50 lakh on October 13, according to published price data. Prices can vary across cities and jewellers.
The suspension also comes amid concerns over India’s import bill and the pressure on the rupee.
India’s merchandise exports rose 23% year-on-year to $44.4 billion in September, while imports increased 8% to $74.61 billion. The merchandise trade deficit stood at $30.21 billion, wider than the $26.86 billion recorded in August, according to trade data released on Thursday.
Gold imports, however, fell to $1.8 billion in September from $2.3 billion in August. A bullion dealer cited in the Reuters report said gold and silver imports had declined sharply over the preceding two months compared with a year earlier and had not contributed to the trade deficit during that period.
India depends heavily on imported gold to meet domestic demand. Higher imports increase the amount of foreign currency required to pay overseas suppliers and can add to the country’s trade deficit.
The rupee has also faced pressure this year from elevated global oil prices, which have increased India’s energy import bill, and selling by foreign investors in Indian equities.
The fund houses have not publicly explained why they suspended bulk subscriptions. The timing, however, places the move ahead of a period when gold demand could rise, even as policymakers remain watchful of the country’s external balances.
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