Chennai: Gross redemptions in Indian gold ETFs rose to a record Rs 3330 crore in May, while the month saw first monthly net outflow in May after April 2025 after the fund houses limited investments following restrictions on gold imports and investors took to profit-booking. Gold jewellery, bar and coin demand has remained subdued through May and early June, finds the World Gold Council.
Indian gold ETFs saw a sharp reversal in May. Domestic gold ETFs recorded their first monthly net outflow since April 2025 as net outflows stood at Rs 725 crore, the largest on record in rupee terms.
Gross redemptions also rose to a record Rs 3330 crore, highlighting the scale of selling during the month. Despite this, overall holdings were broadly steady at 116.5 tonnes, while total AUM stood at Rs 1,84,600 crore.
Outflows were likely driven by profit-taking following the mid-May import duty hike of 9 per cent that pushed domestic gold prices and the traded price of ETFs sharply higher. Gold prices rose by around 6 per cent soon after the hike, prompting investors to lock in gains.
This was also visible in folio data: investor accounts declined by 134,343 in May, the sharpest monthly fall on record, bringing the total number of active folios to 12.3 million. The high redemptions and reduction in folios suggest that some investors used the price rise to trim or exit their gold ETF positions.
Several fund houses introduced temporary limits on large investments into gold ETFs with direct subscriptions capped at Rs 25cr and gold ETF fund-of-funds lump-sum investments capped at Rs 10 lakh per PAN per calendar month. Although the fund houses have pointed to prevailing market and economic conditions, these measures come amid broader concerns around gold imports, external balances, currency pressures, and the Prime Minister’s appeal to consumers to curtail their gold buying.
Given that large investors account for a sizable proportion of AUM, the cap on investment could limit inflows into fund houses to some extent, although they can continue to buy from the secondary market where authorised participants and market makers continue to operate and provide liquidity.
“But the outflows appear to have been short-lived. Flows turned positive again in early June, with net inflows of Rs 1631 crore between 1–11 June, suggesting that investor interest in gold ETFs remains strong,” finds WGC.
Gold jewellery demand remained subdued through May and early June, a seasonally soft period that was further affected this year by an inauspicious period as per the Hindu calendar, reducing retail footfalls.
Gold price volatility also led to a cautious, “wait-and-watch” approach among consumers across regions and segments. Industry feedback also suggests that bar and coin demand remained broadly stagnant, while new store openings slowed, reflecting the moderate mood across the trade.
In response to this softening, retailers have focused on old-gold exchange transactions. Anecdotal evidence suggests that the share of exchange business has risen between 5–15 per cent. For some retailers it has accounted for as much as 60-70 per cent of sales.
Retailers also note that some pockets of demand have emerged in recent days, fuelled by the pullback in the gold price and, in part, by expectations of policy measures aimed at limiting gold buying.
Overall, market participants broadly expect demand to remain soft through June and July before improving from August onwards as the seasonal demand cycle kicks in.
Leave a comment