Axis Silver ETF has delivered a 46.9% three-year CAGR, topping the category for funds with over ₹1,500 crore in assets. While long-term returns have been strong, recent performance shows significant volatility, with some funds seeing double-digit drops in a single month. Investors should understand commodity price risks and tracking errors before entering this space.
What Happened
Axis Silver ETF has emerged as the top performer among silver exchange-traded funds (ETFs) in India over a three-year period. According to data tracked as of June 24, 2026, the fund recorded a three-year Compound Annual Growth Rate (CAGR) of 46.9 percent. This places it slightly ahead of peers like ICICI Prudential Silver ETF (46.9 percent) and Kotak Silver ETF (46.7 percent). This ranking considers only those funds with at least ₹1,500 crore in assets under management (AUM). Among these top-tier funds, ICICI Prudential Silver ETF maintains the largest corpus, holding over ₹15,985 crore.
The Volatility Warning
While long-term numbers appear attractive, investors should note that silver prices are notoriously volatile. The recent one-month data highlights this risk, with some funds recording declines of around 15.7 percent. Commodities behave differently than stocks; they are often influenced by global industrial demand, central bank policies, and currency fluctuations, rather than company-specific earnings. A three-year high does not guarantee future performance, and short-term price swings can be sharp and unpredictable.
Why Tracking Error and Expenses Matter
Unlike traditional mutual funds, ETFs are designed to track the price of physical silver. However, they rarely track the price perfectly. This difference is called the "tracking error." If a fund has a high tracking error, its performance may lag significantly behind the actual price of silver. Furthermore, investors should pay close attention to the expense ratio. This is the annual fee charged by the fund house. Even a small difference in the expense ratio can reduce long-term returns, especially in an asset class where price gains can fluctuate wildly. Investors may compare these costs across different fund houses to ensure they are not paying too much for the same underlying asset.
The Risk of Commodity Cycles
Silver is an industrial metal. Its price is heavily dependent on manufacturing demand for electronics, solar panels, and medical devices. When the global economy slows down, industrial demand for silver often drops, which can lead to price corrections. Unlike equity funds, where companies can improve their profits through better management or cost-cutting, silver ETFs rely entirely on the price of the metal. If the commodity cycle turns negative, the fund value will fall regardless of how well the fund manager is operating.
What Investors Should Track
Investors looking at silver ETFs should focus on a few key factors. First, check the AUM size; larger funds generally provide better liquidity, making it easier to buy and sell units without significant price gaps. Second, monitor the tracking error over the last 12 months to see how closely the fund follows the silver price. Finally, consider the tax implications. In India, gains from silver ETFs are typically taxed according to the income tax slab of the investor, which is a different structure compared to long-term equity capital gains. Always verify the latest tax rules before investing.