Several mutual fund houses have temporarily restricted fresh investments in gold ETF fund of funds (FoFs), with the curbs taking effect on October 16, ahead of the festive season.
ICICI Prudential Mutual Fund, HDFC Mutual Fund, Aditya Birla Sun Life Mutual Fund, Invesco India Mutual Fund, DSP Mutual Fund and Tata Mutual Fund are among the fund houses that have issued notices to investors announcing the restrictions.
The curbs apply to gold ETF fund of funds (FoFs) and include fresh lump-sum investments, new systematic investment plan (SIP) registrations and additional investments through existing SIPs, such as top-ups. Certain notices also restrict switch-in transactions and new systematic transfer plan (STP) registrations.
Existing SIP and STP instalments registered before the restrictions take effect will continue to be processed, according to the notices issued by fund houses. Redemptions and switch-outs will also remain permitted. The restrictions are temporary and will remain in place until further notice.
DSP Mutual Fund’s notice, dated October 15, said applications received after the 3 pm cut-off on October 15 would be liable to rejection, with the application amount refunded to investors. Existing systematic transactions registered on or before October 15 will continue to be processed.
Reuters reported on October 15 that several large Indian mutual funds, including Kotak Mahindra Mutual Fund, UTI Mutual Fund and HDFC Mutual Fund, had issued notices suspending bulk subscriptions to gold ETFs.
The report said the notices did not specify a reason for the move and that redemptions were not restricted.
Citing sources familiar with discussions, Reuters reported that the move followed a nudge from the Securities and Exchange Board of India (SEBI). The regulator had not responded to Reuters’ request for comment outside business hours.
The restrictions come ahead of Dussehra and Diwali, when demand for gold typically rises. India depends heavily on imports to meet domestic gold demand, and increased bullion imports can put pressure on the country’s trade balance and the rupee.
Reuters reported that India’s gold imports declined to $1.8 billion in September from $2.3 billion in August. However, gold and silver ETF inflows had risen during the previous year’s festive season as investors turned to precious metals amid lacklustre equity market returns.
The restrictions announced so far concern gold ETF FoFs and should not be interpreted as a blanket ban on buying physical gold or investing directly in gold ETFs.
Investors should check the relevant scheme notice for the specific transactions affected.
NOTE TO READERS
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Readers should consult certified experts before making any investment decisions.