Kotak Mutual Fund has temporarily suspended lumpsum/switch-in investments in its silver ETF fund of fund (FoF) as domestic silver is currently trading at a significant premium compared to international prices due to acute scarcity in India’s physical silver market, effective Friday.
Why the premium is surging
It said in a statement that the premium has increased from approximately 0.5% in early September to 5.7% as of October 9. On Thursday, the intra-day premium peaked at 12% before closing at 5.7%. “Current market conditions show a buying premium of approximately 10% and a selling premium of approximately 3%,” it added.
The fund house anticipates that the shortage in domestic silver supply may persist through the end of October.
Protecting investors
“Existing SIPs/STPs in Kotak Silver ETF Fund of Fund remain active,” it said. “We will resume lumpsum/switch-in subscriptions once the premium normalizes to acceptable levels.”
Kotak MF continues to maintain a constructive outlook on silver from a long-term investment perspective and said this measure is purely aimed at protecting investors from entering at inflated domestic premiums.