(Mike Maharrey, Money Metals News Service) Rule changes announced by Indian regulators could further boost demand for precious metals in the country.
India ranks as the world’s second-largest gold market behind China. It is also one of the top silver-consuming nations.
Under the new regulations announced by the Securities and Exchange Board of India (SEBI), equity funds can now invest up to 35 percent of their assets in gold and silver instruments.
According to the Economic Times of India, the new rules are part of broader reforms aimed at making “mutual fund schemes more flexible and diversified.” Other changes will allow equity funds to invest in units of infrastructure investment trusts.
According to Bloomberg, India has $385 billion in actively managed stock funds. These funds primarily invest in publicly traded stocks, providing investors with exposure to a wide range of equities without having to purchase individual stocks. In practice, your money is pooled with other investors, and a fund manager uses the money to create a (hopefully) diversified portfolio. There are various types of equity funds, including index funds, sector funds, and growth funds.
According to Bloomberg, the new Indian rules will give fund managers a “broader toolkit.”
“The change could also create a new source of demand for gold and silver, which have attracted robust investor interest amid a blistering rally.”
An Indian asset manager told the Times that the new regulations will give fund managers more flexibility and make funds more stable in periods of turmoil.
“A higher allocation to precious metals can help reduce downside risk during equity market stress, but it may also moderate returns when equity markets are strongly bullish.”
Another fund manager noted that the rule will provide a place to park idle cash where it will not be subject to inflationary devaluation.
Indians have historically preferred physical gold and silver. Over the last decade, Indian investors have snapped up 1,800 tonnes of gold coins and bars, highlighting Indian passion for the yellow metal.
However, there has been growing interest in paper gold and silver over the last year. In December 2023, Indian ETFs held a modest 42.3 tonnes of gold. As of January 2026, Indian gold-backed funds held 110.5 tonnes of gold, a 161 percent increase.
Investor participation has also grown by leaps and bounds. In January, Indian funds reported another 1.2 million accounts, pushing the total number of gold ETF folios to 11.4 million.
A gold ETF is backed by a trust company that holds metal owned and stored by the trust. In most cases, investing in an ETF does not entitle you to any amount of physical gold. You own a share of the ETF, not gold itself. ETFs are a convenient way for investors to play the gold market, but owning ETF shares is not the same as holding physical gold.
Last month, investors put more money into gold ETFs than they did into stock funds. Bloomberg called this “a rare reversal that underscores the growing appeal of bullion amid market uncertainty.”
The new regulations will allow equity funds to gain more exposure to gold, diversifying sources of demand in the country.
Analysts say the new rules won’t likely substantially boost overall Indian gold demand. However, it may lead to even higher demand during periods of strong demand as fund managers strategically deploy gold and silver as a hedge during times of geopolitical and economic uncertainty.
“In reality, fund managers are likely to use this flexibility selectively during uncertain market phases, such as periods of geopolitical tension or when equity valuations appear stretched. Overall, exposure to commodities will remain limited and tactical, with equities continuing to form the dominant portion of portfolios,” fund manager Chirag Muni told the Times.
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
