Nearly 20 asset management companies have suspended fresh lump-sum and SIP investments into Gold Fund of Funds to manage festive gold demand and support the Rupee. Existing SIPs remain active, and Gold ETFs continue to trade normally on exchanges. Investors may need to pivot to alternative gold investment routes if they were planning new allocations.
Major mutual fund houses in India, including SBI Mutual Fund, HDFC Mutual Fund, and ICICI Prudential, have stopped accepting new money into gold fund of funds (FoFs). This action follows recent regulatory guidance from October 15 and 16, which aims to reduce domestic gold demand and manage the impact on the Indian Rupee during the peak wedding and festive season.
While physical gold demand naturally rises during this period, authorities are taking steps to manage the Current Account Deficit by controlling investment-driven flows. This is a structural attempt to ensure the Rupee remains stable against volatility in global crude oil prices and to manage foreign exchange leakage.
The restriction is specific to Gold FoFs—mutual funds that invest in underlying gold ETFs. It does not apply to Gold ETFs themselves. Investors can still buy Gold ETFs directly on the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE) if they have a demat account. This distinction is crucial, as it shows that the directive targets the mass-market entry point for gold inflows while keeping the liquid, exchange-traded mechanism for gold functioning for other investors.
For those with existing SIPs in these funds, these investments are generally not being cancelled, ensuring that current participants are not forced out of their positions. However, starting new SIPs, making lump-sum additions, or topping up existing investments is currently not possible for these specific funds. Investors who want to continue building their gold portfolio have alternatives. Gold ETFs are the most direct option, although they require a demat account for trading. Sovereign Gold Bonds (SGBs) in the secondary market also remain an available path, though investors should remember that long-term capital gains on such holdings are taxed at 12.5%.
The key for investors is to avoid panic or shifting their entire asset allocation strategy based on this temporary liquidity freeze. The primary monitorable for the future will be any updates on when these inflows might resume, which will likely depend on the broader macroeconomic situation and the stability of the Rupee following the festive season.