Kotak MF Halts Lumpsum Subscriptions In Silver ETF Fund Of Fund Citing High Spot Premium
Domestic silver is currently trading at a significant premium compared to international prices due to acute scarcity in India's physical silver market.
Kotak Mutual Fund temporarily suspended lumpsum and switch-in investments in Kotak Silver ETF Fund of Fund on Friday, citing the high spot premium for silver over the import parity price. The open-ended Fund of Fund scheme invests in units of Kotak Silver ETF, listed on the stock market.
"Domestic silver is currently trading at a significant premium compared to international prices due to acute scarcity in India's physical silver market... We anticipate that the shortage in domestic silver supply may persist through the end of October 2025," according to a statement.
A switch-in investment is the process of transferring money from one mutual fund scheme to another as part of portfolio reallocation.
The company said it will resume subscriptions once the premium normalises to "acceptable levels".
Existing SIP (Systematic Investment Plan) and STP (Systematic Transfer Plan) in Kotak Silver ETF Fund of Fund remain active. Redemptions will also continue.
Kotak Mahindra Asset Management Co. Managing Director Nilesh Shah said the company continues to maintain a bullish outlook on silver as an asset class on a long-term basis.
"Due to speculation or short covering, the spot silver for the last two days is trading at a premium of 10-12 % over import parity prices. Premiums don’t last long. Their costs remain forever," he said in a post on X.
Premium Concerns
"Global silver markets have experienced a sustained demand-supply deficit over recent years, driving prices upward. In light of this trend, we have been advising investors to consider allocating funds to silver as part of a diversified portfolio," Kotak MF said.
Explaining its decision, the company said the domestic premium has increased from approximately 0.5% in early September 2025 to 5.7% as of Oct. 9, 2025.
On Thursday, the intraday premium peaked at 12% before closing at 5.7%. The current market conditions show a buying premium of approximately 10% and a selling premium of approximately 3%, Kotak MF said.
"The selling premium remains modest at approximately 3%, and we continue to maintain a constructive outlook on silver from a long-term investment perspective. This measure is purely aimed at protecting investors from entering at inflated domestic premiums," the statement said.
