Kotak Mutual Fund has temporarily suspended lump sum subscriptions in its Kotak Silver ETF Fund of Fund due to a sharp increase in the spot premium of silver over the import parity price. The move aims to protect investors’ interests as silver prices surge to record levels both in India and global markets.
The fund house clarified that Systematic Investment Plans (SIPs) and redemptions in the scheme will continue as usual, while the underlying Kotak Silver ETF, which is listed on the stock exchange, remains open for trading.
Kotak AMC’s Strategic Move to Safeguard Investors
Announcing the update on social media platform X (formerly Twitter), Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Company (Kotak AMC), said the decision was a prudent step in light of current market conditions impacting silver pricing.
In an official addendum, Kotak Mutual Fund explained that the existing high spot premium has made new lump sum investments inefficient. “This suspension is a temporary measure taken in the best interest of investors,” the company stated.
The fund house further mentioned that the Kotak Silver ETF Fund of Fund will resume fresh subscriptions once the spot premium stabilizes and aligns with the import parity price.
Silver Prices Hit Record Highs in Indian and Global Markets
The announcement comes amid a dramatic rally in silver prices. On Thursday, silver surged by ₹6,000, hitting a new record high of ₹1,63,000 per kilogram in the national capital, according to data from the All India Sarafa Association. This sharp rise coincided with silver touching the $50 per ounce mark for the first time in the international spot market.
This marks the second major rally in a week. On October 6, silver had soared by ₹7,400 to close at ₹1,57,400 per kg, while on Wednesday it settled at ₹1,57,000 per kg.
Experts attribute this surge to a combination of geopolitical uncertainties, economic slowdown fears, and expectations of U.S. interest rate cuts, which have boosted safe-haven demand for precious metals.
“Silver prices have hit record highs as heightened political and economic uncertainties, coupled with expectations of U.S. rate cuts, have driven investors toward safe-haven assets,” said Jigar Trivedi, Senior Research Analyst at Reliance Securities.
Gold Prices Hold Steady at Record Levels
In contrast, gold prices remained steady near their all-time highs in the local bullion market.
Gold of 99.9% purity traded at ₹1,26,600 per 10 grams, while gold of 99.5% purity was priced at ₹1,26,000 per 10 grams, inclusive of all taxes.
On the global stage, spot gold was trading marginally lower at $4,039.26 per ounce, reflecting profit-booking after recent highs.
Market Experts React to Silver Rally and Fund Suspension
Market analysts believe Kotak Mutual Fund’s temporary suspension is a risk management measure to prevent investors from entering at inflated valuations. The spike in the spot premium—caused by high demand and limited supply—has widened the gap between the domestic and international silver prices, making lump sum purchases less efficient.
Financial advisors also noted that Systematic Investment Plans (SIPs) remain a disciplined way to invest in precious metal funds, helping investors average out costs during volatile market phases.
Meanwhile, Kotak AMC reiterated its long-term bullish outlook on silver, citing the metal’s growing industrial use in renewable energy, electric vehicles, and electronics. The fund house emphasized that once the market stabilizes, the Silver ETF Fund of Fund will reopen for regular subscriptions.
Investor Outlook: Silver Shines Amid Global Uncertainty
With silver prices breaching key resistance levels and outperforming gold in recent weeks, investor interest in silver ETFs and silver mutual funds has surged. However, fund houses like Kotak AMC are treading cautiously to ensure fair value entry for new investors.
The global macroeconomic environment—marked by the U.S. government shutdown, economic data delays, and uncertain Federal Reserve policy direction—continues to influence precious metal trends.
As silver trades above the crucial $50 per ounce threshold, analysts expect volatility to remain high in the short term, but maintain a positive medium- to long-term view on the metal’s performance.