Kotak, Axis MF Likely to Restrict Inflows into Gold ETFs Amid Industry Changes

Gold ETFs Face Restrictions as Indian Market Records Net Outflows

Indian gold exchange-traded funds (ETFs) have recorded their first monthly withdrawal since May 2025, with net outflows of $61 million in May. This reversal comes after $297.2 million of inflows were seen in April. The sector is witnessing a significant shift, with three major fund houses, HDFC AMC, ICICI Pru AMC, and Nippon India AMC, already announcing restrictions on large inflows into their gold ETFs.

Kotak Mutual Fund, Axis Mutual Fund, and Aditya Birla Sun Life AMC are the latest to follow suit, potentially restricting large inflows into their gold ETFs. The AUM for Kotak's gold ETF is $1.5 billion, Axis Mutual Fund's gold ETF is $571 million, while ABSL AMC's gold ETF has an AUM of $308 million. The move is likely a response to the import duty announcement, which lifted domestic gold prices and prompted investors to book profits.

The gold prices have extended their decline for a third straight month, falling 1.7% in May after easing 1.7% in April and 11.6% in March. The decline in gold prices has led to a decrease in investor interest, resulting in the net outflows. The restrictions on large inflows into gold ETFs are a significant development in the Indian market.

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Restrictions on Large Inflows

HDFC AMC has announced restrictions on lump-sum subscriptions in HDFC Gold ETF and HDFC Gold ETF Fund of Fund. The restriction will apply to investments of at least Rs 25 crore. For HDFC Gold ETF Fund of Fund, lump-sum purchases and switch-in transactions will be processed only up to Rs 10 lakh per PAN per calendar month at the first-holder level.

ICICI Pru AMC has also announced the suspension of direct subscriptions exceeding Rs 25 crore in the Gold Exchange Traded Fund (ETF) by eligible investors until further notice. Nippon India Mutual Fund has announced temporary restrictions on investments in its gold-focused schemes, Nippon India ETF Gold BeES and Nippon India Gold Savings Fund, citing prevailing market conditions.

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Market Expectations

Bhavik Patel, Senior Commodity Research Analyst at Tradebulls Securities, expects gold prices to remain range-bound in the near term. According to Patel, the biggest concern for gold remains persistent inflation and the possibility of tighter monetary policy from the US Federal Reserve. Any hint from the Fed for liquidity tightening and rate hikes may spook gold bulls and send prices lower.