Mutual Funds Halt Fresh Gold ETF FoF Investments Ahead Of Festive Season

Several mutual fund houses have temporarily suspended fresh investments in gold exchange-traded fund fund-of-funds (Gold ETF FoFs) from Friday, according to multiple reports.

The restrictions cover fresh lump-sum investments, new systematic investment plan (SIP) registrations and additional contributions through existing SIPs, including top-ups. Some fund houses have also restricted switch-in transactions and fresh systematic transfer plan (STP) registrations.

Investor communications describe the measures as temporary, with the restrictions remaining in force until further notice.

One fund house reportedly said it implemented the curbs following instructions communicated through industry channels after regulatory consultations.

The notices clarify that existing SIP and STP instalments registered before the restrictions took effect will continue as scheduled. Investors can still redeem their investments or submit switch-out requests.

Another fund house reportedly stated that it could reject applications submitted after Thursday’s prescribed cut-off time and return the money to investors. Existing systematic transactions registered before the effective date will continue without interruption.

The notices did not specify the reasons behind the move, according to the reports.

The restrictions come ahead of Dussehra and Diwali, when gold demand typically strengthens. India relies heavily on imports to meet domestic bullion demand. Higher gold imports can widen the trade deficit and put pressure on the rupee.

Earlier this year, Prime Minister Narendra Modi urged citizens to avoid purchasing gold for a year amid global economic uncertainty and the conflict in West Asia. He called on people to conserve foreign exchange reserves in the national interest.

“At any function, we should not buy gold jewellery” for a year, Modi said, urging citizens to commit to avoiding gold purchases during the period.

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