Gold ETFs Restrict Large Investments Amid Rupee Concerns Following Sebi Talks

India's Mutual Fund Players Move to Curb Large Gold ETF Investments

India's leading mutual fund players have taken steps to curb large lump-sum investments into gold exchange-traded funds (ETFs) following discussions with the Securities and Exchange Board of India (Sebi) on measures to ease pressure on the rupee and reduce demand for imported gold. The move, which is largely a gesture of support for Prime Minister Narendra Modi's call to reduce pressure on India's external account, is expected to have a negligible impact on actual gold demand.

Industry executives have stated that single investments of the size being restricted are extremely rare, making the restrictions largely symbolic. The decision was made after a meeting of top mutual fund chief executives with Sebi officials last week, where the regulator and industry executives explored ways to address the issue without disrupting retail investors or market functioning.

According to industry sources, the mutual fund players agreed to discourage high-ticket lump-sum investments, rather than suspending subscriptions altogether, which could create unintended consequences, including speculative activity in exchange-traded units and disruptions to ongoing Systematic Investment Plan (SIP) investments.

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The first move came from HDFC Mutual Fund, which announced restrictions on fresh subscriptions exceeding Rs 25 crore in its gold ETF offerings on Thursday. This was followed by ICICI Prudential Mutual Fund and Nippon India Mutual Fund, the country's largest gold ETF manager, on Friday.

Industry sources have stated that other fund houses, including Aditya Birla Sun Life Mutual Fund, Kotak AMC, and several peers, are expected to announce similar measures in the coming days. However, two executives at smaller fund houses stated that they were aware of the discussions but were not involved in conversations among larger asset managers.

The measures are seen as largely symbolic, given that single investments exceeding Rs 25 crore are extremely rare in gold ETFs. The industry wanted to demonstrate support for the broader effort to reduce pressure on the currency without affecting retail participation.

The move comes amid growing concerns over India's external account as higher crude oil prices and strong gold imports add to dollar demand. On May 10, Prime Minister Narendra Modi urged citizens to defer gold purchases for a year to help conserve foreign exchange.

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Gold ETFs: A Growing Segment

Gold ETFs have emerged as one of the fastest-growing segments of the mutual fund industry over the past year, with investors seeking protection against geopolitical uncertainty, currency volatility, and rising gold prices. The category peaked in 2026 with Assets Under Management (AUM) topping Rs 3 lakh crore. However, the 25% correction in the price of precious metals has significantly reduced demand.

The category currently manages approximately Rs 1.71 lakh crore in assets and receives average monthly inflows of around Rs 6,500 crore (June 2025 to April 2026), according to industry data.