Several large mutual fund houses have suspended fresh subscriptions into their gold exchange-traded funds (ETFs) and fund of funds (FoFs) as the ongoing conflict in West Asia continues to swell the country’s imports bill and put pressure on foreign exchange reserves.
HDFC Mutual Fund, ICICI Prudential Mutual Fund, Tata Mutual Fund and Nippon India Mutual Fund have all placed such curbs on gold ETF schemes, which came into effect between June 5-8.
“Investors are requested to note that the Board of ICICI Prudential Trust Ltd has approved temporary restriction on subscriptions of ICICI Prudential Gold ETF (Gold ETF) with effect from the close of market hours of June 5, 2026. Subscriptions in Gold ETF directly with ICICI Prudential Asset Management Company Ltd (AMC) by eligible investors for an amount exceeding Rs 25 crores shall not be accepted till further notice,” said ICICI MF.
Other fund houses also placed similar curbs on fresh subscriptions into their gold ETF schemes.
Prime Minister Narendra Modi had last month called upon the public to help the country battle against the threats posed by the West Asia war, announcing measures to curb fuel usage, gold imports and foreign exchange drain.
Under the SEBI regulations, gold ETFs are mandated to invest 95% of their net assets in physical gold and other SEBI-mandated gold instruments, which drives up the need for gold imports.
Notably, these restrictions are applicable only for large transactions in the segment, with other services such as SIPs and redemptions still open for investors. Thus, these are aimed at restricting inflows from institutional investors rather than retail participants.
Gold import bill for the March 2026 quarter was $ 22.57 billion and full year of FY26 at $ 71.97 billion as against $9.5 billion and $ 58 billion respectively in the previous year, RBI data says.
Many industry players welcomed measures announced by the fund houses.
“We hope other AMCs also follow suit, because as an industry, we have to recognise that excessive financialisation of gold at elevated prices can add to import demand, put pressure on the current account deficit, and eventually contribute to rupee depreciation. Our stance on gold has been very clear. Indians should not only stop buying gold at these levels, but also look at selling a small portion of their idle gold holdings,” according to Feroze Azeez, joint CEO of Anand Rathi Wealth.
Calling these restrictions on gold ETF inflows a “responsible step,” Azeez said, “India holds nearly $4 trillion worth of household gold, while the current account deficit is around $65 billion. That means even 1% to 1.5% of household gold coming back into circulation can make a meaningful difference to India’s external finances.”
These restrictions are likely to dampen the momentum seen in gold ETF inflows over the past few months.
“It looks likely that such curbs are expected to remain until there is some meaningful resolution in West Asia. Gold and silver ETFs have become a popular avenue to hedge for institutional players, especially during the risks that exist today. That explains some of the reason why flows into gold ETFs have boomed, alongside retail interest. However, if hedging is taken out of the equation, flows might dry up a bit in the coming months,” a fund manager at a domestic fund house said.
Notably, investments in gold ETFs crossed that into the traditionally popular equity funds for the first time when it had more than doubled month-on-month to a record high of Rs 24,040 crore in January 2026.
This was on the back of gold’s rise to prominence at a time when US tariff threats had drawn safe-haven demand for the precious metal.
However, inflows have since moderated to the pre-boom levels of Rs 2,000-Rs 4,000 crore as the safe-haven demand has since shifted to the dollar.
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