ICICI Prudential and HDFC Mutual Fund Restrict Gold ETF Investments: Impact on Investors and SIPs Unchanged

HDFC Mutual Fund and ICICI Prudential Imposes Restrictions on Large Gold Investments

In a move aimed at mitigating operational strain caused by unprecedented inflows, HDFC Mutual Fund has imposed restrictions on large investments in its gold exchange-traded funds (ETFs). ICICI Prudential Asset Management Company has also announced similar temporary curbs on new subscriptions to its ICICI Prudential Gold ETF.

According to HDFC Mutual Fund, fresh investments above Rs 25 crore in gold ETFs will not be allowed from June 8. ICICI Prudential's restriction on new subscriptions will be effective after market hours on June 5, 2026. Additionally, HDFC Mutual Fund has capped lump-sum investments in gold fund of funds (FoFs) at Rs 10 lakh per Permanent Account Number (PAN) per calendar month, effective from June 5.

Commodity analysts believe that while such a move by the asset management companies is structurally prudent, the real pinch is felt by high-net-worth individuals and corporates. The restrictions may also push investors to seek alternatives to gain exposure to gold.

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Analysts predict that such a move by HDFC and ICICI Mutual Funds may prompt other fund houses to consider similar measures if strong inflows persist. This could signal mounting pressure on gold investment products.

Dr. Renisha Chainani, Head of Research at Augmont, believes that HDFC MF's move to restrict lump-sum investments is a "structurally rational, operationally prudent response to this extraordinary inflow pressure." She argues that limiting large lump-sum entries prevents institutional players from dumping volatile cash loads into the fund, shielding existing retail unit holders from tracking errors and sudden NAV dilution.

Gold ETFs in India saw a net outflow of $61 million in May, a sharp reversal from the $297.2 million inflow recorded in April. The bulk of the month's redemptions came in the wake of the import duty announcement, which pushed domestic gold prices higher and created an opportunity for profit-taking.

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SIP and STP investors remain unaffected by the move. Existing investors who had already set up Systematic Investment Plans (SIPs) or Systematic Transfer Plans (STPs) before HDFC Mutual Fund's restriction took effect will continue to have their investments processed normally.

Commodity analysts estimate that such a move by the AMC to block large lump-sum capital from gold ETFs could temporarily increase investment demand for alternative yellow-metal products. Lump-sum investors may either delay the investment or spread it out through SIPs. They may also choose competing gold ETFs, gold mutual funds from other fund houses, physical gold, digital gold, or other gold-backed products.

Beyond mutual fund products, other investment avenues remain available. The Pension Fund Regulatory and Development Authority (PFRDA) is evaluating a relaxation of gold ETF allocation limits for pension funds, while Sovereign Gold Bonds (SGBs) remain an option, though fresh issuances have been limited in recent years.

However, Chainani believes investors need not rush to switch products. "The precedent of Silver ETF FoF restrictions being lifted once supply normalised suggests HDFC's curbs are transient—making patience, not product-switching, the rational response for most investors," she said.