Silver ETF Prices Hit Record; Kotak Mutual Fund Puts Fresh Investments On Hold

Kotak Mutual Fund has temporarily halted fresh lump-sum and switch-in investments in its Kotak Silver ETF Fund of Fund (FoF), effective Friday. This decision comes in response to a significant surge in the domestic silver premium, which has risen from approximately 0.5% in early September to 5.7% as of October 9.

Kotak said that investments are halted as the current premium makes new purchases less efficient. The fund clarified that Systematic Investment Plans (SIPs) and redemptions will continue without interruption.

The underlying Kotak Silver ETF, being a listed fund, remains open for trading and is not subject to suspension. Kotak MF said fresh subscriptions to the fund of funds will resume once the spot premium stabilizes and aligns with the import parity price. Despite the temporary halt, the fund house reaffirmed its positive long-term outlook on silver.

“Keeping in mind the high spot premium for Silver over the import parity price, Kotak MF is suspending lump sum subscription in Kotak Silver ETF Fund of Fund. SIPs and redemptions will continue as before in the regular course of business. Kotak Silver ETF, being a listed fund, doesn’t have a provision for suspension. Whenever the spot premium aligns with the import parity price, the fund will open for subscription as we continue to maintain a bullish outlook on Silver as an asset class on a long-term basis,” said Kotak AMC’s Managing Director Nilesh Shah in a post on X.

Silver Prices Surge

Silver prices surged sharply, rising ₹6,000 to a record ₹1,63,000 per kg on Thursday, as the white metal crossed the $50 per ounce mark in overseas markets for the first time.

This marked the second steep surge in a week, following a ₹7,400 jump to ₹1,57,400 per kg on October 6. On the international front, silver gained more than 2% to breach the key $50 per ounce level in spot markets.

The primary reason for this sharp increase is a shortage of physical silver in the domestic market, driven by factors such as heightened industrial demand and festive buying. This scarcity has led to silver trading at a significant premium compared to international prices, affecting the valuation of the Kotak Silver ETF FoF, which tracks the domestic price of silver.

SEBI-registered analyst Financial Sarthis noted that silver has formed a massive cup and handle pattern spanning over 45 years on its yearly charts. With three months to go, a close above $50 could trigger a huge multi-year move. But they also cautioned that given the relentless rally, traders should wait for a pullback than chase fresh buys.

SILVERBEES Disparity

On Thursday, Nippon India Silver ETF price surged nearly 9%, despite spot silver prices slipping. The ETF reached a record NAV of ₹165 per unit, while MCX Silver December futures declined 0.75% to ₹1,48,738 per kg, indicating a significant disparity between the fund and its underlying asset.

According to an Economic Times report, analysts attributed the anomaly to heavy buying pressure following silver’s all-time high above ₹1.5 lakh per kg the previous day. Market experts also warned that such demand-supply mismatches can cause ETFs to trade at steep premiums or face sharper corrections when sentiment reverses.

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