India’s markets regulator has introduced a major change in how mutual funds value the physical gold and silver they hold, aiming to make pricing more accurate and reflective of local market conditions.
What’s Changing and Why It Matters
From April 1, 2026, mutual funds in India will be required to use spot prices published on domestic stock exchanges to value their physical holdings of gold and silver. This replaces the previous practice of relying on international benchmark prices set by the London Bullion Market Association (LBMA).
Instead of using global price fixes and adjusting them with currency conversions, duties, and local costs, funds will turn to indigenous spot pricing — a move regulators believe will better mirror what these precious metals are actually worth in India’s marketplace.
SEBI’s Goal: Align Valuations With Local Market Reality
The Securities and Exchange Board of India (SEBI) made this decision after consultation within its Mutual Fund Advisory Committee. The shift is aimed at improving transparency, standardizing valuation methods across funds, and ensuring mutual fund investors receive asset values that are consistent with domestic trading conditions.
By adopting spot prices set by exchanges that settle physically delivered gold and silver contracts, the revised approach should reduce the discrepancies that arise from applying international price benchmarks to the Indian market.
What This Means for Investors
1. Better Reflects India’s Market
Valuing gold and silver using domestic pricing helps funds align more closely with the realities of investing in India — especially for instruments like Gold and Silver Exchange Traded Funds (ETFs).
2. Reduces Complexity
Under the old system, funds adjusted international prices for exchange rates, duties, and logistics costs before applying them locally. The new method removes much of this complexity.
3. Potential Impact on Fund Performance
Because NAV (Net Asset Value) calculations affect how funds are priced and tracked, this rule change could subtly shift performance figures — especially for funds that hold large quantities of gold and silver.
🗓 When the New Rules Take Effect
The updated valuation methodology becomes effective April 1, 2026, in line with broader updates to SEBI’s mutual fund regulations scheduled for implementation next year.
Why This Is Important for Global & Domestic Investors
- Domestic Insight: The change underscores India’s effort to strengthen local market infrastructure.
- Investor Clarity: Aligning valuations with Indian market prices helps investors see a truer picture of how funds perform.
- Global Shift in Perspective: Moving away from London-based reference prices is part of a broader trend toward localization of capital markets.
Final Thought
SEBI’s revision of gold and silver valuation rules marks an important step in the evolution of mutual fund transparency. By ensuring valuations reflect local price discovery, investors could benefit from clearer fund reporting and valuation that resonates more directly with market conditions in India.