Indian fund houses halt bulk buying of gold ETFs before festive demand peak

what happened

Several large Indian mutual funds, among them Kotak Mahindra, UTI and HDFC, published notices late on Thursday suspending bulk subscriptions to gold exchange-traded funds. The notices gave no explanation, and redemptions from these schemes remain unrestricted.

According to a fund executive familiar with the matter, the step followed a suggestion from the Securities and Exchange Board of India. Two bullion industry officials confirmed the pause came after talks with the regulator. Sources asked not to be named because they cannot discuss their dealings with the watchdog. A SEBI spokesperson had not replied to a request for comment made outside working hours.

The rupee has slid this year as higher global oil prices swelled India's import bill and foreign investors sold local equities heavily. Robust gold demand has added pressure, and the government raised import duties on gold and silver earlier in the year. Gold imports dropped to $1.8 billion in September from $2.3 billion in August.

why it matters

The move could curb ETF inflows during Dussehra in October and Diwali in early November, when gold buying is traditionally strong; those inflows surged last festive season. A private bank dealer called the timing surprising, since precious-metal imports have fallen and did not add to the trade gap, and suggested the step may be a precaution against an October import surge.

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