Several major Indian mutual funds, including Kotak Mahindra Mutual Fund, UTI Mutual Fund, and HDFC Mutual Fund, have suspended bulk subscriptions to gold exchange-traded funds (ETFs) just ahead of the festive season, according to livemint.com. The move was announced late on Thursday and does not affect redemptions from these funds.
The suspension follows a nudge from the Securities and Exchange Board of India (SEBI), as confirmed by a mutual fund executive familiar with the discussions and two bullion industry officials. These sources, who declined to be named due to restrictions on commenting about regulator talks, indicated that the halt was coordinated after consultations with SEBI. The regulator did not respond to requests for comment outside business hours.
This decision comes amid pressure on the Indian rupee caused by rising global oil prices and heavy foreign investor selling in Indian equities. Additionally, strong demand for gold has contributed to the currency's weakness, prompting the government to raise import duties on gold and silver earlier this year. India, the world's largest consumer of silver and second-largest consumer of gold, depends heavily on imports, which can widen its trade deficit. Gold imports dropped to $1.8 billion in September, reflecting these market dynamics.
The mutual fund notices did not specify reasons for the suspension, but the timing ahead of the festive season—when investor demand for gold typically rises—highlights regulatory caution. The next key data point will be India's trade figures for October, which will show how these measures affect gold import volumes and the broader currency situation.