Axis, DSP to Nippon: Silver ETF Fund of Funds still open for fresh investments

Silver has delivered remarkable gains to investors this year. The white metal has surged nearly 90% since last Diwali, rising to new lifetime highs every other week.

The silver price spike is due to many factors, including the rising demand for silver in crucial sectors like 5G, solar and EV, and supply deficit in the markets. This demand-supply imbalance has led to an unprecedented bull run in silver prices, with all silver investments, including physical metal, mutual funds, ETFs and futures, seeing increased demand.

Many mutual fund houses have temporarily suspended fresh lump-sum and switch-ins in their silver ETF Fund of Funds (FoFs), primarily because of liquidity concerns in the physical silver market.

As many as eight mutual fund houses have suspended new lump-sum investments and switch-ins in their Silver ETF FoFs.

However, some funds are allowing other investment routes, including Systematic Investment Plans (SIPs), Systematic Transfer Plans (STPs), redemptions and switch-outs, in accordance with the existing Scheme Information Document.

Which funds have suspended investments in Silver ETF FoFs?

Kotak Mutual Fund, SBI Mutual Fund, UTI Mutual Fund and Groww Mutual Fund have suspended fresh lump sum and switch-in investments in their Silver ETF FoFs. These funds, however, still allow SIP investments, both existing and fresh.

Tata Mutual Fund, ICICI Prudential Mutual Fund and Aditya Birla Sun Life MF have suspended all new investments, including switch-ins, lump sum and SIPs. During the suspension, redemptions, switch-outs and systematic withdrawal plan (SWP) may still be permitted. HDFC Mutual Fund has restricted investments up to ₹1 lakh per PAN per day.

These restrictions were introduced gradually from October 10.

Are some funds still accepting new investments?

Despite the liquidity trouble, some fund houses continue to accept investments in their Silver ETF FoFs. Many funds, including Axis Silver FoF, DSP Silver ETF FoF and Nippon India Silver ETF FoF, continue to accept new investments as of October 15, 2025.

These fund houses have not announced any suspension yet, which means they might keep functioning normally.

Reasons behind the suspension

Silver ETF FoFs invest mainly in silver ETFs. Silver ETFs are required to hold physical silver to back their units. As per reports, the suspensions are due to a shortage of physical silver in the market and restricted liquidity.

In simple terms, due to limited physical silver, it is hard to create fresh ETF units.

"This is to inform investors that, due to prevailing market conditions and the shortage of physical silver in the domestic market, silver is trading at a premium relative to international prices. Therefore, the premium in domestic silver prices directly impacts the valuation of the Scheme," Tata Mutual Fund had said while announcing the suspension.

Due to the supply squeeze, silver is trading at a premium in domestic markets. This premium directly affects the valuation of the schemes.

What about existing investors?

The demand-supply imbalance can lead to a situation where ETF units trade at a price higher than the actual value of the physical silver they represent. With these restrictions, fund houses are aiming to protect investors from entering at premium (inflated) prices.

These suspensions reflect a growing trend among fund houses, and other AMCs might take similar action in the near future, in response to volatility and supply-side pressures.

However, this is not a concern for existing investors of these FoFs, as this is for new investments. Existing SIPs will continue in most funds. Those who want to start new investments in these FoFs can look for active funds, but must take note of market fluctuations.

Remember to keep a check on further communication from AMCs on suspension and other updates.