Why Did Kotak MF Suspend Lump Sum Investments in Silver ETF Fund of Fund?
Temporary Pause Reflects High Premiums and Market Volatility in Domestic Silver
According to the official notice, the sharp premium has been driven by a scarcity of physical silver in the Indian market, which has inflated the local price. Since the Kotak Silver ETF directly mirrors domestic silver rates, this premium translates into higher impact costs for investors entering via the Fund of Fund route.
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All purchase or switch-in requests timestamped before 3 PM on October 9, 2025, will be accepted and processed as per applicable NAV. This ensures fairness for investors who had placed their orders before the cut-off.
The premium-driven distortion between international and domestic silver prices is not unique to Kotak’s scheme — it reflects a broader trend in Indian commodity markets where liquidity constraints can create significant tracking errors for Exchange Traded Funds (ETFs) linked to physical assets.
Experts suggest that those considering commodity-linked funds should study liquidity depth, daily traded volume, and tracking difference before committing large sums. SIPs help reduce timing risk and smooth out cost averaging across price cycles.
Investor Takeaway
Indian-Share-Tips.com main analyst Gulshan Khera, CFP®, who is also a SEBI Registered Investment Adviser, observes that Kotak’s move is a prudent measure to protect investors from inflated entry NAVs caused by market distortions. He adds that investors should always consider ETF liquidity and premium before investing, as “impact cost” is a real yet invisible factor in low-volume markets.For free expert market insights and guidance, explore more updates at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
Related Queries
Should investors prefer SIPs over lump sum in commodity ETFs?
What is the hidden impact cost in ETF investing and how can it be minimized?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
