With silver rising to record highs, Kotak Mutual Fund, SBI Mutual Fund, and UTI Mutual Fund have suspended fresh lump sum investments in their silver exchange traded fund (ETF) fund of funds (FoFs).
In India, investors seeking exposure to the precious metal can choose between silver ETFs or silver ETF FoFs, both offering exposure to the precious metal without the hassle of physical storage, though the cots, convenience and taxation differ.
Silver ETFs are funds that invest directly in physical silver and trade like equities on exchanges through a demat account.
Silver FoFs invest in silver ETFs and don’t need a demat account. FoFs come with higher costs. While silver ETFs charge lower expense ratios (between 0.40 percent and 0.56 percent); their FoF counterparts are costlier, with expense ratios between 0.70 percent and 0.96 percent.
What triggered the move?
Silver has seen a sharp rally this year, with MCX spot prices up over 89 percent at Rs 1,62,432 a kg as on 10th October, 2025. Industrial demand, especially from sectors such as solar energy, electric vehicles (EVs), and electronics and a shortage are the reason for the spike.
Kotak Mutual Fund was the first to announce a temporary suspension of lump-sum and switch-in investments in the Kotak Silver ETF Fund of Funds. The move was in investors’ best interests, given the sharp premium at which domestic silver is trading, it said.
“We will resume lump sum/switch-in subscriptions once the premium normalises to acceptable levels. SIPs and STPs will continue uninterrupted,” it said.
A significant widening of the premium on domestic silver prices — from 0.51 percent in early September to 5.7 percent by October 9 — resulted in higher buying costs and lowering selling premiums, the fund house said.
SBI Mutual Fund and UTI Asset Management Company followed Kotak’s lead, halting fresh lump sum investments in their silver ETF FoFs from October 13.
“The current limited availability of physical silver has put a constraint on the creation of new units by the ETFs at the indicative NAV,” the SBI Mutual Fund said.
The suspension is for lump sum and switch-in transactions. Systematic investment plans (SIPs) and systematic transfer plans (STPs) continue as usual.
The fund houses moved to protect investors from entering at inflated prices caused by temporary demand-supply imbalances in the physical silver market. Once the market stabilises and premiums normalise, normal lump sum investments are expected to resume.
The decision reflects caution amid an extraordinary silver rally and supply crunch. ETFs trading at a premium is not the best time to enter. Wait for prices to cool or for NAVs to realign with the market. The long-term story for silver remains strong but timing the entry is crucial.
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