Several mutual fund houses have temporarily suspended fresh investments in Gold Exchange-Traded Fund Fund of Funds (Gold ETF FoFs), with the restrictions coming into effect on October 16. Fund houses including ICICI Prudential Mutual Fund, HDFC Mutual Fund, Aditya Birla Sun Life Mutual Fund, Invesco India Mutual Fund, DSP Mutual Fund, Tata Mutual Fund and Shriram Mutual Fund have notified investors about the changes.
Under the restrictions, investors cannot make fresh lump-sum investments, register new Systematic Investment Plans (SIPs) or increase contributions through SIP top-ups in the affected schemes. Some fund houses have also suspended switch-in transactions and registrations of new Systematic Transfer Plans (STPs).
What Do the Notices Say?
Shriram Mutual Fund stated that the restrictions were introduced in accordance with directions communicated by the Securities and Exchange Board of India (SEBI) through the Association of Mutual Funds in India (AMFI). However, the notice did not specify the exact reason for the restrictions.
From October 16, the fund house has stopped accepting fresh lump-sum investments, new SIP registrations and step-up requests to increase existing SIP contributions.
In a notice dated October 15, DSP Mutual Fund said applications received after the 3 pm cut-off time on that day could be rejected, with the money returned to investors.
According to a Reuters report published on October 15, several major mutual fund houses, including Kotak Mahindra Mutual Fund, UTI Mutual Fund and HDFC Mutual Fund, had also issued notices restricting bulk subscriptions to Gold ETFs.
Restrictions Ahead of the Festive Season
The move comes just before the Dussehra and Diwali festive season, when gold purchases traditionally increase in India.
Gold ETF FoFs are mutual fund schemes that invest in Gold ETFs, allowing investors to gain exposure to gold prices without purchasing physical gold.
According to Reuters, investments in gold and silver ETFs increased during last year’s festive season as investors showed greater interest in precious metals amid relatively weak stock market returns.
However, gold demand has been comparatively subdued this year. India’s gold imports declined from $2.3 billion in August to $1.8 billion in September, according to the figures cited in the report.
The temporary restrictions may affect investors planning to increase their exposure to gold through these mutual fund schemes during the festive season. Investors should check the latest notices issued by their respective fund houses for details of the restrictions and any subsequent changes.