Finance

Mutual Funds Halt Fresh Investments in Gold Fund of Funds Ahead of Diwali

Mutual funds have stopped fresh lump sums, switch-ins and new SIPs in gold fund of funds from 16 October, reportedly after a SEBI nudge. Existing SIPs continue.

Raj ·Founder & Editor

Published in Finance · 5 min read · Oct 16, 2026

Gold bars and coins beside a laptop and phone showing a flattened investment chart, illustrating the halt on fresh investments in gold fund of funds

In this article

India's mutual fund houses have stopped accepting fresh money into their gold fund of funds (FoFs) from 16 October 2026, just ahead of Dussehra and Diwali. Lump-sum purchases, switch-ins and new SIP registrations have been blocked, while existing SIPs and redemptions continue.

Despite social media claims that the government has "banned" gold mutual funds, the restrictions were announced by individual asset management companies (AMCs) through notices issued late on Thursday, 15 October. Most of the notices do not give a reason. According to Reuters, as carried by BusinessLine, the move followed a nudge from the market regulator, the Securities and Exchange Board of India (SEBI). SEBI has not issued a public circular on the matter so far.

What has been stopped

In most cases, the following transactions are no longer accepted in the affected gold FoFs:

Fresh and additional lump-sum investments
Switch-ins from other schemes
New SIP registrations
New STP registrations where the gold FoF is the target scheme
Top-ups or step-ups on existing SIPs

ICICI Prudential Mutual Fund's notice, dated 15 October, says fresh subscriptions in ICICI Prudential Gold ETF FOF "shall be discontinued" through all modes from 16 October. Others, such as Invesco India and Quantum, describe the suspension as temporary and say it will continue "till further notice." No fund house has given an end date.

Which fund houses are affected

Fund houses that have issued notices include HDFC, ICICI Prudential and Tata Mutual Fund, The Economic Times reported. Reuters named Kotak Mahindra, UTI and HDFC, while CNBC-TV18 listed Aditya Birla Sun Life, Invesco India, DSP and Shriram among them.

A tracker maintained by distributor platform Creso counted 17 AMCs with notices by the morning of 16 October, also including SBI, Nippon India, Axis, Mirae Asset, HSBC, LIC, Quantum, Zerodha and Groww. It noted that combined gold-silver FoFs from HDFC, Kotak and Mirae Asset have been shut as well, while pure silver funds and multi-asset funds were not named in any notice.

Effective dates differ slightly

Most restrictions apply from 16 October. Some, including Invesco India and Quantum, took effect from the close of business on 15 October. DSP Mutual Fund's notice says applications received up to the 3 pm cut-off on 15 October will be processed, while those received later "shall be liable to rejection" and the money refunded.

What still works for existing investors

Existing SIPs continue. ICICI Prudential, Invesco India and DSP say SIP and STP instalments registered before the effective date will keep being processed. Only top-ups are switched off. Invesco adds that when subscriptions reopen, SIPs with a top-up feature will restart at the base amount as on the effective date.

Redemptions are open. The notices restrict only money coming in. Invesco and Quantum explicitly say redemptions, switch-outs and systematic withdrawal plans (SWPs) are unaffected, and reports say no fund house has restricted withdrawals.

Why now: the SEBI nudge, the rupee and Diwali

Most notices do not explain the move. Reuters reported that a mutual fund executive familiar with the discussions said the decision followed a nudge from SEBI, and two bullion industry officials confirmed it came after talks with the regulator. CNBC-TV18 reported that Shriram Mutual Fund told investors the restrictions followed SEBI instructions conveyed through the Association of Mutual Funds in India (AMFI). A source also told ET Online that the Reserve Bank of India (RBI) had sent a document on the matter to SEBI for consideration.

The broader backdrop is pressure on the rupee. The currency has lost about 7% this year, making it one of Asia's worst performers, as high oil prices swelled the import bill and foreign investors sold Indian shares. We covered that pressure in our report on the Indian stock market in October 2026.

India imports most of its gold, so heavy gold buying adds to demand for dollars. The government already raised import duty on gold and silver to 15% from 6% earlier this year. Gold funds ultimately buy physical gold, so fund flows add to import demand.

Festive timing is also a factor. Demand typically jumps around Dhanteras and Diwali, and gold and silver ETF inflows surged during last year's festive season. Indian Bullion and Jewellers Association president Surendra Mehta told ET Online the curbs may aim to avoid a similar rush. Gold imports actually fell to $1.8 billion in September from $2.3 billion in August, which led one bullion dealer to tell Reuters the step "looks more like a precautionary measure to avoid a surge in imports in October."

For more on recent price swings in the metal, see our explainer on why gold has been wobbling above $4,000.

What about gold ETFs?

Gold FoFs are mainly used by investors without a demat account; they put money into a fund that in turn buys units of a gold exchange-traded fund (ETF). Reuters described the move as a suspension of "bulk subscriptions" to gold ETFs, but CNBC-TV18 noted that the curbs announced so far concern gold ETF FoFs and should not be read as a blanket ban on buying physical gold or gold ETFs directly.

Gold ETF units can still be bought on the NSE and BSE through a demat account. However, if demand shifts to the exchange while fresh unit creation is limited, ETF prices can trade above their indicative net asset value (iNAV), as some international ETFs did in 2024 and silver ETFs did in October 2025, according to Creso.

What should investors do

This is general information, not personal advice.

Do not cancel a running gold FoF SIP expecting to restart it later. A fresh registration will be rejected while the pause lasts.
Do not panic-sell. The pause only affects new money. Your existing units, NAV and redemption rights are unchanged.
Check your fund's own notice on the AMC's website for exact cut-off times and which transactions are blocked.
If you buy gold ETFs on the exchange, compare the market price with the iNAV first, to avoid paying an inflated premium.
Review your overall allocation. Gold is usually treated as a diversifier rather than a core holding. Our guide on how much gold should be in your portfolio explains the trade-offs.
Weigh other routes carefully. Physical gold and digital gold carry their own costs, making charges and storage risks.

What to watch next

The key question is how long the pause lasts. Watch for a formal SEBI or AMFI statement, updated notices from fund houses, the rupee's direction and gold import data for October, which will capture festive demand.

Sources

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Written by Raj

Founder & Editor

I write HorizonDesk: practical, no-hype articles on technology, money, business and the vehicles we drive. Everything here is something I’ve researched, tested or wanted explained clearly myself.