Nippon AMC Considers Restricting Large Inflows into Gold ETFs Amid Recent Patterns of Heavy Buying

India's Gold ETF Market Under Scrutiny: Nippon India AMC Set to Restrict Large Inflows

The Indian gold exchange-traded fund (ETF) market is undergoing a significant shift, with Nippon India AMC likely to join HDFC AMC and ICICI Pru AMC in restricting large inflows into its gold ETFs. According to sources familiar with the matter, Nippon India AMC's GoldBeEs is the largest gold ETF in the country, with an asset under management (AUM) of nearly $6 billion.

Nippon India AMC has not publicly commented on the matter, with Moneycontrol having reached out to the company for a response. However, the move is seen as a response to the recent policy measures aimed at curbing gold imports and reducing pressure on India's external accounts. In May, the government capped duty-free imports of gold at 100 kilograms per licence, as part of a broader effort to monitor bullion inflows.

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The decision by HDFC Asset Management Company to temporarily restrict large investments into its Gold ETF and Gold Fund of Fund schemes comes after a couple of weeks ago, the AMC had announced plans to withdraw their new fund offer (NFO) for their Gold and Silver Passive FOF post Prime Minister Modi's austerity measures announcement. The AMC has stated that these decisions come amid a broader debate over the role of gold in household savings and an uncertain near-term outlook for bullion prices.

Prime Minister Modi had recently urged citizens to pause gold purchases, highlighting concerns that elevated gold imports could worsen the country's current account deficit (CAD). This move is seen as an effort to encourage investors to consider equity and debt mutual funds that mobilize household savings into productive assets, contributing to the financing of India's growth, businesses, and infrastructure aspirations.

The government's recent policy measures aimed at curbing gold imports and reducing pressure on India's external accounts have sent shockwaves through the gold ETF market. However, distributors Moneycontrol spoke to have expressed surprise on the move and have noted that no further explanation on the move has been provided, although they have added that the impact of such a move is limited to large investors and not to most retail investors who look at Gold ETFs.

This is a developing story and will be updated as more information becomes available.

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