Several mutual fund houses have temporarily suspended fresh investments in Gold ETF Fund of Funds (FoFs), effective Friday, ahead of the festive season, according to multiple reports.
Gold ETF FoF Investment Rules What Investors Need to Know
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.
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.
Why Have Mutual Funds Restricted Fresh Gold ETF FoF Investments?
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.
PM Modi Earlier Urged Citizens to Avoid Gold Purchases for a Year
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.
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