Key Points:
- Kotak MF halts Silver ETF FoF investments amid rising premiums.
- Silver premium jumps to 5.7% on supply shortage.
- Temporary step to protect investors from overvaluation.
Mumbai, Oct. 10: Kotak Mutual Fund Silver ETF has temporarily suspended lumpsum and switch-in investments in its Silver Exchange-Traded Fund (ETF) Fund of Fund (FoF) effective Friday. The fund house cited a sharp increase in the domestic silver price premium, driven by acute scarcity in India’s physical silver market.
In a statement, Kotak Mutual Fund said domestic silver prices are currently trading at a significant premium compared to international rates. The premium, which was around 0.5% in early September, has surged to 5.7% as of Oct. 9. On Thursday, it briefly touched an intra-day high of 12% before closing at 5.7%.
“Current market conditions show a buying premium of approximately 10% and a selling premium of approximately 3%,” the fund house said.
Premium surges to 5.7%
The sharp rise in the silver premium reflects an imbalance between supply and demand in the domestic market. Analysts said increased demand for silver from investors and industrial users, combined with lower imports, has tightened physical supply.
The fund house said it would monitor market developments closely. “We will resume lumpsum/switch-in subscriptions once the premium normalizes to acceptable levels,” Kotak Mutual Fund Silver ETF stated.
At present, the suspension applies only to new lumpsum and switch-in investments. Existing systematic investment plans (SIPs) and systematic transfer plans (STPs) in the Kotak Silver ETF Fund of Fund will continue unaffected.
Temporary step to protect investors
According to the fund house, the decision was taken in the interest of investors to prevent potential overvaluation risks. High domestic premiums could lead to inflated purchase prices for new investors, which may not align with the fund’s net asset value (NAV) based on international silver prices.
Fund managers said this temporary measure will ensure fair treatment of existing investors while maintaining the fund’s integrity. “The suspension will be lifted once the price distortion between domestic and international markets reduces,” an official familiar with the matter said.
Supply shortage may last through October
Industry participants expect the domestic shortage to continue through the end of October. Silver imports have reportedly slowed in recent weeks due to higher global prices and logistical challenges, further widening the gap between domestic and international rates.
Experts said similar measures may be taken by other fund houses if the premium remains elevated. “If the physical shortage persists, more asset managers may follow suit to safeguard investors from volatility,” a senior fund analyst said.
The Kotak Mutual Fund Silver ETF, which invests in the Kotak Silver ETF, offers investors exposure to silver prices without directly purchasing the metal. The scheme’s assets under management have grown steadily in 2025 amid increased investor interest in precious metals as a hedge against inflation and currency volatility.
Kotak Mutual Fund Silver ETF said it remains committed to acting in the best interest of its investors and will resume normal operations once market conditions stabilize.
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