India Allows Equity Funds to Buy Gold
India's market regulator has broadened rules for the country's $384 billion actively managed equity funds, allowing them to allocate more capital to gold and silver. The move could represent a significant shift in investment strategies within the major emerging market.
The Securities and Exchange Board of India's (SEBI) decision is part of a larger overhaul of mutual fund regulations aimed at increasing transparency and ensuring schemes are true to their labels. This broader reform includes tightening rules for portfolio overlap between different types of funds and introducing new categories like life-cycle funds. Under the new rules, actively managed equity funds can invest up to 35% of their assets in gold and silver instruments after fulfilling their primary equity investment mandates. This provides fund managers with a new tool for diversification and liquidity management beyond traditional money-market instruments. The change is significant for India's rapidly growing mutual fund industry, which was valued at over $900 billion. Projections indicate the market could reach $1.27 trillion by 2031, with retail investors making up a substantial portion of this growth. This regulatory shift coincides with a notable trend where Indian investors have shown increased interest in bullion. In January 2026, investments in gold exchange-traded funds (ETFs) surpassed inflows into equity funds, highlighting the metal's appeal amid market volatility. In a related move to bolster the domestic market, SEBI also changed the valuation method for gold and silver. Effective April 1, 2026, funds must use domestic spot prices from Indian stock exchanges, replacing the previous reliance on London Bullion Market Association (LBMA) prices. The new regulations also introduce "life-cycle" or "target-date" funds, which can allocate up to 10% of their assets to gold and silver ETFs and other related derivatives. These funds are designed for goal-based investing, such as retirement planning. This policy is considered progressive on the global stage, as many developed markets have more restrictive rules for integrating alternative assets like precious metals into traditional equity funds. The compliance deadline for existing funds to align with these new regulations is six months from the announcement.
