Overview
- More than a dozen asset managers, including Kotak, HDFC and UTI, issued notices effective October 16 that temporarily stop new lump-sum investments and new SIP/STP registrations into gold ETFs and fund-of-funds.
- The suspensions also cover step-ups, top-ups and some switch-ins while allowing redemptions and already registered SIP/STP instalments to continue.
- Industry sources told reporters the action followed discussions with the Securities and Exchange Board of India and fund houses described the restrictions as temporary and open-ended until further notice.
- Regulators and market participants say the aim is to limit a seasonal spike in ETF-driven physical bullion purchases because ETFs are backed by physical gold and fresh inflows can translate into imports paid for in foreign currency.
- Watch for October import and trade data and any further regulator or fund notices, since the measures could shift festival buying into jewellery or coins and affect the rupee and India’s merchandise deficit.