Mutual fund houses halt fresh gold ETF FoF investments ahead of festive season

Several mutual fund houses have temporarily halted fresh investments in Gold ETF fund-of-funds, including lump-sum contributions and new SIP registrations, until further notice. Existing systematic investments and redemptions remain unaffected, amid seasonal gold demand and concerns over India's bullion imports

New Delhi: Several mutual fund houses have temporarily suspended fresh investments into gold exchange-traded fund fund-of-funds (Gold ETF FoFs), effective from Friday, as per multiple reports. The restrictions cover fresh lump-sum investments, new systematic investment plan (SIP) registrations and additional contributions through existing SIPs, including top-up facilities. Some fund houses have also curtailed switch-in transactions and fresh systematic transfer plan (STP) registrations, they said.

According to investor communications, the measures are temporary and will remain in force until further notice. Moreover, one of the fund houses stated that the curbs were being implemented following instructions communicated through industry channels after regulatory consultations.

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However, the restrictions were said to apply to fresh subscriptions, new SIP registrations and step-up requests under existing SIP mandates. The notices issued by asset managers also clarified that existing SIP and STP instalments registered before the effective date would continue to be processed.

However, investor redemptions and switch-out requests would also remain unaffected. Similarly, another fund house stated that applications submitted after the prescribed cut-off time on Thursday could be rejected with funds returned to investors, according to the reports.

Existing systematic transactions registered before the restrictions took effect will continue without interruption. Reports noted the notices did not provide a specific reason for the move, while redemptions remained open to investors. The restrictions come at a time when demand for gold typically strengthens ahead of the Dussehra and Diwali festivals.

In addition, India relies heavily on imports to meet domestic bullion demand and higher gold imports can influence the trade deficit and exert pressure on the rupee.

Earlier in the year, Prime Minister Narendra Modi urged citizens to avoid buying gold for a year to conserve foreign exchange reserves during global economic uncertainty and the West Asia conflict PM Modi said that for a year, at any function, we should not buy gold jewellery. In the national interest, we must resolve not to purchase gold for a year, he added.