Kotak Mahindra Asset Management Company (KMAMC) has temporarily halt all new and additional lump-sum or switch-in investments in its Kotak Silver ETF Fund of Fund. The fund house reasoned that the step was taken to prevent fomo buying.
Why did Kotak decide to pause new investment in silver ETF?
The company said that the domestic silver prices were trading at an abnormally high premium, 10-12% above import parity levels. And Kotak, instead of feeding into that inflated market, decided to protect investors from walking straight into overvaluation.
In its official statement, the asset management company noted that this price anomaly stemmed from a shortage of physical silver in the domestic market. This was seen as a temporary mismatch, too many buyers chasing too little supply. The market, as it tends to do, inflated the spot price to unreasonable levels.
The official statement
Nilesh Shah, Managing Director of Kotak Mutual Fund, addressed the matter directly on X (formerly Twitter), stating, “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… Whenever the spot premium aligns with the import parity price, the fund of fund will open for subscription.”
Shah even reinforced that Systematic Investment Plans (SIPs) and redemptions will continue unhindered, ensuring ongoing investors are not punished for conditions beyond their control.
What the notice says
Kotak’s Notice-cum-Addendum spelled out the operational mechanics of this pause. All purchase or switch-in transactions timestamped on or before 3:00 PM on October 9, 2025, would be processed at the applicable NAV. Beyond that, no fresh money would enter, at least not until the price premium cooled.
Meanwhile, SIPs, STPs, redemptions, and switch-outs remain fully functional. The fund continues to operate as usual for existing investors, maintaining both liquidity and routine functioning.
Silver, often called the “poor man’s gold,” has seen a sharp rise in demand amid global economic uncertainty, industrial demand shifts, and speculative buying. However, when the domestic price runs so far ahead of import parity, the premium doesn’t just signal optimism, it signals distortion.
Shah had warned earlier about this very pattern. “Most important thing to watch is the Premium on the Spot silver. Due to speculation or short covering the spot silver for last two days is trading at a premium of 10–12% over import parity prices. Premiums don’t last long. Their costs remain forever.”
For context, the Kotak Silver ETF Fund of Fund invests in units of the Kotak Silver ETF, an exchange-traded fund that tracks domestic silver prices. Essentially, it offers investors exposure to silver without physically holding the metal. However, when the domestic price itself becomes inflated, new entrants risk buying at unjustified highs.
By freezing lump-sum investments, Kotak claimed this move will shield new investors from paying that premium. The fund’s internal structure prevents suspension within the listed ETF itself, but the Fund of Fund, being the gateway for many retail participants, can be temporarily closed.
