SEBI Greenlights Mutual Funds for Gold, Silver ETFs from 2026

The Securities and Exchange Board of India (SEBI) has updated its regulations, effective April 1, 2026, to allow non-debt active mutual fund schemes to invest in gold and silver Exchange-Traded Funds (ETFs). This new provision offers Indian mutual fund managers a strategic tool to potentially hedge against equity market volatility and macroeconomic uncertainties.

This regulatory shift is an enabling provision, not a mandatory requirement for fund managers. They retain discretion to decide if and when these precious metals align with their portfolio strategies. Decisions will depend on the fund house’s assessment of prevailing market conditions, inflation trends, and interest rates.

Key Investment Details

• Effective Date: April 1, 2026
• Eligible Schemes: Non-debt active mutual fund schemes
• Asset Classes: Gold and silver ETFs
• Discretionary: Fund managers decide allocation based on strategy
• Current Exposure Limits: Some schemes as low as 10 percent, others up to 35 percent in flexicap funds

The updated framework also introduces changes in the valuation methodology for these precious metal holdings. Previously, funds often relied on international benchmarks like the London Bullion Market Association (LBMA) for pricing. The new approach aims for greater consistency with domestic market prices.

Revised Valuation Approach

• Previous Method: International benchmarks, such as the London Bullion Market Association (LBMA)
• New Method: Domestic exchange-polled spot prices
• Objective: Ensure valuation aligns with prices available in the Indian market
• Potential Impact: May lead to minor discrepancies in tracking global commodity trends

While the inclusion of gold and silver can enhance portfolio diversification, investors must monitor specific risks. Precious metal prices are influenced by global macroeconomic factors, currency fluctuations, and geopolitical events. These factors do not always move in tandem with the stock market.

Understanding Investment Risks

• Silver Volatility: Higher price fluctuations compared to gold due to its dual use in jewelry and industrial applications.
• Industrial Demand Impact: A slowdown in industrial demand can lead to significant price changes for silver.
• Execution Challenges: Very large allocations during extreme market stress could potentially pose execution challenges, despite ETFs generally being liquid.

Investors are advised to review the latest fact sheets or scheme information documents provided by their mutual fund house. This will ascertain whether their specific scheme has adopted this flexibility and what limits have been placed on precious metal exposure.