Whalesbook
SEBI Permits Gold in Equity Funds
The Securities and Exchange Board of India (SEBI) has now allowed equity mutual funds to invest in gold and silver exchange-traded funds (ETFs). This significant regulatory change, announced on February 26, permits fund managers to invest a portion of their schemes in these commodities, within set limits. This gives fund houses more flexibility to diversify portfolios and potentially improve returns.
Bandhan AMC Leads the Way
Bandhan Asset Management Company (AMC) is among the first to adopt this new rule, adding gold exposure to select equity-oriented funds. Sirshendu Basu, Head of Product Management & Strategy at Bandhan AMC, noted that this investment is opportunistic, based on market conditions and fund manager judgment. The strategy aims to capture opportunities in the gold market, historically a safe haven during economic uncertainty and geopolitical risks.
While gold has shown strong returns, including over 65% in 2025 and more than 200% since October 2022, it can also experience periods of low activity and past volatility. Prices have previously dropped nearly 50% from their all-time highs.
Portfolio Impact and What's Next
Financial advisors often suggest allocating 10-15% to gold via ETFs for diversification and to manage risk. Adding gold to equity funds is not expected to fundamentally change a scheme's main stock focus. Instead, it gives fund managers more tools to improve risk-adjusted returns and build stronger portfolios. Experts believe Bandhan AMC's move could encourage other fund companies to follow, offering varying degrees of gold exposure in their equity funds. Investors should review scheme documents to understand specific allocation levels and potential impacts.