Sebi allows equity mutual fund schemes to increase allocation in gold and silver to 35%

India's markets regulator Sebi has overhauled mutual fund rules, allowing equity schemes to allocate more of their portfolios to gold and silver while tightening classification norms in the country's rapidly expanding $900 billion fund industry.

Sebi said actively managed equity funds may, after meeting core allocation requirements, invest their residual portion, up to 35% of assets, in gold and silver instruments as well as units of infrastructure investment trusts. The move broadens the investment toolkit available to stock funds beyond money-market and liquid securities.

The change comes at a time when demand for hard assets is rising globally. In January, Indian investors poured more money into gold exchange-traded funds than into equity funds, a rare reversal that highlighted bullion’s growing appeal amid market volatility.


By formalising gold and silver exposure within equity and hybrid schemes, Sebi has created scope for fresh institutional demand in precious metals while preserving each scheme’s primary investment mandate. Hybrid funds will also be permitted to invest in gold and silver ETFs.

The regulator has simultaneously introduced a sweeping classification overhaul aimed at curbing portfolio overlaps and ensuring schemes remain true-to-label. Asset managers may continue to offer both value and contra funds, but portfolio overlap between the two cannot exceed 50%. Thematic equity schemes must also limit overlap with other thematic or equity categories to 50%, except large-cap funds.

Thematic funds have three years to comply with the new norms, while other schemes must align within six months. Asset managers will also be required to publish monthly category-wise overlap disclosures on their websites.

Sebi has discontinued solution-oriented schemes with immediate effect, directing existing plans to stop subscriptions and merge into comparable schemes, subject to regulatory approval.

In addition, the regulator approved a new category of life-cycle or target-date funds designed for goal-based investing, including retirement planning. These schemes will have predefined maturities ranging from five to 30 years. Asset management companies may offer up to six active life-cycle funds at a time.

Under the new framework, life-cycle funds can invest up to 10% of assets in gold and silver ETFs, exchange-traded commodity derivatives and infrastructure investment trusts.