India's mutual fund industry has frozen fresh money into gold fund-of-funds (FoFs) in one of the broadest coordinated curbs in the category this year. Late on October 15, fund houses issued notices suspending lump sums, switch-ins, new SIPs and SIP top-ups in their gold FoFs, and by Friday 17 fund houses had curbed 20 schemes, by the count of Cofacto, an independent markets newsletter, The Core reported.

Source: The Core

Fund houses that have issued restriction notices include HDFC Mutual Fund, ICICI Prudential Mutual Fund, Kotak Mutual Fund, Tata Mutual Fund, DSP Mutual Fund, Groww Mutual Fund and Zerodha Mutual Fund, 5paisa reported in its roundup of the AMC notices. The restrictions took effect across October 15 and 16 and are described by the fund houses as temporary, until further notice.

Source: 5paisa

What is stopped — and what is not

The freeze applies to the FoF route, not to gold ETFs themselves. A gold ETF holds gold bars and its units trade on the stock exchange, so buyers trade existing units and no new gold is needed. A gold FoF, used by savers without a demat account, hands money to the fund house, which creates new ETF units and buys fresh gold to back them — that is the flow now blocked, The Core explained.

Existing SIPs registered before the cut-off continue to be processed, and redemptions, switch-outs and systematic withdrawals remain open, according to the AMC notices summarised by 5paisa and Cafemutual. Direct purchases of gold ETFs on the NSE or BSE are not covered by the FoF restrictions.

Source: Cafemutual

SEBI's role — reported, not announced

Shriram Mutual Fund informed investors that the instruction came from SEBI, the markets regulator, relayed through AMFI, the fund industry's trade body, The Core reported. Reuters, citing people familiar with the matter, said the move followed discussions with SEBI as India seeks to shield the rupee. The Times of India, cited by industry reports, said the industry acted on verbal instructions from SEBI on Thursday evening, October 15. SEBI has not commented publicly, and no public SEBI circular setting out a uniform suspension has been independently established, 5paisa noted — so the per-scheme AMC notices remain the operative documents for investors.

Source: TOI via 7Globe

The timing underlines the pressure on the external account: the commerce ministry reported September gold imports down 81% from a year earlier on the day the notices went out, The Core noted. The gold ETF industry is estimated at about Rs 1.7 lakh crore — yaani Rs 1,70,000 crore — of which roughly a third comes through the FoF route, fund officials told TOI. No reopening date has been announced.