Mutual Funds Halt Lumpsum Investments in Silver ETFs Amid Price Surge

On October 14, 2025, it was reported that several leading mutual fund houses in India have taken steps to curb fresh lumpsum investments in their Silver ETF Fund of Funds (FoFs) amid the recent surge in metal prices.

According to the news, Kotak, SBI, and UTI Mutual Funds have temporarily stopped accepting large one-time investments in their Silver ETF FoF schemes. This decision comes as the domestic price of silver has been trading at an abnormally high premium compared to international import parity prices, in some cases as much as 10-12% higher.

Analysts explain that the limited availability of physical silver in the Indian market, coupled with a sharp increase in investor demand, has led to this temporary shortage and price distortion. Silver ETFs and their FoFs are forced to purchase the metal at these inflated domestic spot rates due to the inflow of retail money. Fund managers believe this poses the risk of immediate and significant losses for investors if the premium eventually normalizes.

To protect their customers from buying silver at overvalued prices, the mutual fund houses have opted to suspend lumpsum investments in their Silver ETF FoFs for the time being. However, the ETFs themselves continue to trade on stock exchanges, as the fund houses have no control over transactions on the secondary market.

Despite the recent price surge of 49% in the last three months and 79% in the past year, industry experts maintain that silver still has strong long-term fundamentals, particularly due to its role in green energy technologies. They recommend that retail investors allocate 10-15% of their overall portfolio to gold and silver, but build this exposure gradually through systematic investment plans rather than large lumpsum purchases.