What changed: SEBI proposal and PFRDA rules on gold, silver
Equity mutual funds may get explicit room to hold gold and silver through exchange-traded funds, but this is still at the proposal stage. As reported by Outlook Money, the Securities and Exchange Board of India (SEBI) has suggested allowing equity schemes to hold up to about 35% in non-equity assets, which could include gold and silver ETFs.
A separate SEBI proposal would standardize how funds value precious-metal holdings. According to Moneycontrol, the regulator wants asset managers to use domestic spot prices sourced from Indian commodity exchanges for gold and silver valuation, enhancing transparency and comparability across schemes.
On pensions, the Pension Fund Regulatory and Development Authority (PFRDA) has cleared the route for National Pension System and other pension funds to invest in gold and silver ETFs. As reported by FXStreet, caps are modest, government pension schemes around 1% of AUM and private funds somewhat higher but still limited in relation to other buckets.
Why it matters for equity funds and pensions
Adding a measured sleeve of gold or silver could diversify equity-heavy portfolios and potentially reduce drawdowns in stress periods. The flip side is that higher non-equity exposure can dilute equity beta and temper upside during strong stock-market phases.
As reported by Business Today, NPS assets were about ₹16 lakh crore as of November 2025, so even small percentage allocations can be meaningful over time. “A long-term structural rewiring of capital flows,” said Alok Jain, Founder, Weekend Investing.
Immediate impact, scope, and $384B figure caveats
Near-term effects are likely limited. SEBI’s changes are proposals, not final rules, and equity fund houses would still need to align any metals exposure with scheme mandates, risk limits, and category definitions.
Scope also differs by regulator. SEBI’s framework pertains to mutual funds, whereas PFRDA governs pensions. Even where permitted, allocations tend to be incremental and driven by each scheme’s stated investment objective.
Treat the $384 billion figure cautiously. This analysis has not verified that number against an official circular, so it is used only as a hypothetical base. On such a base, a 1% sleeve equals $3.84 billion.
Allocation caps and gold and silver ETFs access
Access would generally be via gold and silver ETFs that track refined metal meeting Indian standards and are listed domestically. For pensions, ETFs fit existing operational processes, custody, and audit norms, while remaining within regulator-set caps.
Valuation via domestic spot prices and example scenarios
Using domestic spot benchmarks for valuation aims to standardize NAVs and better reflect local liquidity and taxes. That can also reduce dispersion in reported values across funds holding similar metal exposure.
Illustration, not a forecast: if an equity fund with ₹10,000 crore AUM devoted 2% to gold and 1% to silver ETFs, that would be ₹200 crore and ₹100 crore respectively, still small relative to core equity risk.
For scale only: if active-equity AUM were hypothetically $384 billion, a 2% combined sleeve would represent $7.68 billion. Actual allocations, if any, would likely be more conservative at the outset.
Category identity risks for equity funds versus hybrids
Allowing larger non-equity sleeves could blur lines between equity and hybrid or multi-asset categories. As noted by Business Standard, comparisons and benchmark choices become harder if funds vary widely in metals or other non-equity exposure.
FAQ about gold and silver ETFs
What are the current allocation caps for gold and silver in NPS and other pension funds under PFRDA?
Government pension schemes are around 1% of AUM; private pensions somewhat higher but still limited. Caps apply via gold and silver ETFs, subject to each scheme’s policy.
How would adding gold and silver ETFs affect the risk/return and drawdown profile of equity mutual funds?
Small sleeves can diversify returns and soften drawdowns when equities fall. They may also slightly reduce equity-led upside. Impact depends on allocation size and evolving correlations.
| DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing. |
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