India’s capital markets regulator has introduced a landmark reform permitting actively managed equity mutual funds to allocate up to 35 percent of their portfolios to gold and silver instruments. The move forms part of a broader overhaul of India’s rapidly expanding mutual fund industry, which now manages approximately $900 billion in assets.

Under the revised framework, actively managed equity schemes may deploy their residual allocation—after adhering strictly to their core equity mandate—into gold and silver exchange-traded funds (ETFs), alongside infrastructure investment trusts. Previously, equity funds were allowed to invest 20–35 percent of their corpus in non-equity instruments such as debt and real estate investment trusts, but precious metals were excluded from the permissible universe. The change provides fund managers with structured exposure to traditional safe-haven assets without diluting their primary equity orientation. Hybrid funds have been granted similar permissions to invest in gold and silver ETFs.

The regulatory shift coincides with a notable change in investor behavior. In January 2026, gold ETF inflows surged to ₹24,040 crore, more than doubling December’s prior record of ₹11,647 crore and marginally surpassing the ₹24,029 crore invested in actively managed equity schemes during the same month. Silver ETFs attracted ₹9,463 crore, taking total precious metals inflows to ₹33,503 crore—exceeding equity fund collections for the first time in India’s mutual fund history. Industry data indicate that gold ETFs have recorded nine consecutive months of net inflows, with India’s January subscriptions ranking third globally after the United States and China.

Gold’s historically low correlation with equities enhances its portfolio diversification benefits, particularly during periods of market stress. According to the World Gold Council, gold allocation consistently reduces overall portfolio volatility. Market participants view the reform as enabling institutional managers to incorporate bullion as a stabilizing asset class, particularly amid persistent currency volatility and geopolitical uncertainty.

In parallel, SEBI has mandated a significant change in valuation methodology. Effective April 1, 2026, mutual funds must discontinue reliance on London Bullion Market Association pricing and instead adopt polled domestic spot prices published by recognized Indian stock exchanges for physically delivered bullion derivatives. The regulator stated that this transition will better align valuations with domestic market conditions and ensure consistency across fund houses. The Association of Mutual Funds in India (AMFI) will establish operational guidelines for implementing the shift, replacing the previous practice of adjusting offshore benchmark prices for currency conversion, logistics, customs duties, and taxes.

These measures are part of a comprehensive restructuring of fund classifications. SEBI has introduced life-cycle or target-date funds with maturities ranging from five to thirty years, tailored for retirement and goal-based investing. Asset managers may launch up to six active life-cycle funds, positioning them to compete with the National Pension System. Simultaneously, solution-oriented schemes have been discontinued, with existing offerings required to halt new subscriptions pending mergers.

Additional rules impose a 50 percent cap on portfolio overlap between value and contra funds, while thematic schemes must maintain similar separation from other equity categories, except large-cap funds. Thematic and sectoral schemes have three years to comply, whereas other categories must align within six months. Monthly portfolio overlap disclosures are now mandatory, reinforcing SEBI’s emphasis on transparency and true-to-label investing.