Whalesbook
Record Surge Fueled by Safety Demand
India's exchange-traded fund (ETF) market closed fiscal year 2026 with a record ₹1.81 lakh crore in net investments, breaking previous records and more than doubling the prior peak from FY22. This surge marks a sharp increase from the ₹46,000–₹83,000 crore annual inflows seen consistently between FY21 and FY25. While diversification is a common goal, the large inflows into commodity ETFs, especially gold and silver, signal a clear move toward safety. This strategic shift comes as a response to growing global uncertainties, ongoing inflation worries, and questions about traditional stock market valuations, mirroring investor behavior during past financial turmoil. Global ETF markets also saw strong inflows in 2025 with commodities gaining popularity, but India's role in this trend is especially notable.
Gold and Silver Lead the Charge
Commodity ETFs, driven by gold and silver, accounted for about 55% of total ETF inflows in FY26, a big change from their less than 17% share in FY24. Gold ETFs alone attracted ₹68,868 crore (38% of total), while silver ETFs brought in ₹30,412 crore (16.8%). Together, they outperformed equity ETFs' ₹77,780 crore (42.9%) for the first time. This surge is due to not only diversification goals but also significant price jumps. The total value managed by gold ETFs grew 191% to over ₹1.71 lakh crore by March 2026, reflecting investor inflows and rising gold prices. Silver ETFs also saw inflows that grew the category's initial value, boosted by price increases from supply shortages and high demand from industries like solar energy and electric vehicles. Global commodity ETF inflows in 2025 reached $106.65 billion, with gold making up 83% of this, showing a worldwide trend where India's participation is notable.
Risks Emerge as Commodity Prices Volatile
Despite the record inflows, the sharp rise in commodity prices and ETF values comes with risks. In March 2026, gold prices saw a sudden monthly drop of over 10%, the worst since 2013. This was partly due to the U.S.-Iran conflict affecting oil prices, which raised inflation fears again and delayed expected Federal Reserve rate cuts. This event showed how paper gold markets can be influenced by trading volumes, where short-term price moves and margin calls can overshadow investor demand for safety. Silver, while benefiting from steady demand from industries, is also pressured by a stronger dollar and higher real interest rates. Analysts warn of sharp drops if speculators exit positions. Some predict wide swings for silver prices in 2026, with JP Morgan forecasting an $81 average and Bank of America suggesting a bull case of $135-$309, reflecting a mix of monetary policy and industrial demand factors. Additionally, the Securities and Exchange Board of India (SEBI) introduced new rules for gold ETFs starting April 1, 2026. These rules aim to better match local prices and improve clarity on how the underlying gold is valued, though they do not change how volatile its price can be.
Outlook for Gold and Silver ETFs
Looking ahead, analysts remain positive about gold, pointing to ongoing buying by central banks, efforts to diversify away from the dollar, and lasting supply issues as key supports. Goldman Sachs and J.P. Morgan forecast gold prices could hit $5,000-$6,000/oz by late 2026, despite expected dips. For silver, strong demand drivers remain, but high price targets depend on factors like worsening supply shortages and possible Fed rate cuts. The trend for Indian ETFs in FY26 shows investors are strategically shifting from just stocks to safer assets as global conditions remain uncertain. However, commodity price swings and changing global politics create a complex outlook for ongoing gains.