Securities and Exchange Board of India (SEBI) issued a landmark circular directing all mutual funds to overhaul how they value the physical gold and silver held in their Exchange Traded Funds (ETFs).
Effective April 1, 2026, fund houses must stop relying on international benchmarks and instead use domestic polled spot prices from recognized Indian stock exchanges.
The Shift: From London to India
This move is designed to make the Net Asset Value (NAV) of your gold and silver investments more reflective of actual Indian market conditions.
| Feature | Old System (Pre-April 2026) | New System (Post-April 2026) |
| Benchmark | LBMA AM Fixing (London Bullion Market Association). | Domestic Polled Spot Prices (e.g., from MCX or NSE). |
| Adjustments | Required complex manual additions for customs duty, taxes, transport, and currency conversion. | Zero Adjustments needed; the exchange spot price already includes these domestic factors. |
| Transparency | Dependent on international fixings and “notional” premium estimates. | Subject to SEBI-regulated transparency and compliance norms on Indian exchanges. |
Why SEBI Made the Change
- Uniformity: Currently, different fund houses may use slightly different “notional premiums” or transport cost estimates, leading to minute NAV discrepancies for the same asset. The new rule ensures every gold/silver ETF uses the exact same reference price.
- Market Alignment: By using the same prices used to settle physically delivered derivative contracts in India, the NAV will more accurately mirror what you would pay for gold in a local jewelry store or bullion market.
- Regulatory Oversight: Indian stock exchanges operate under strict SEBI oversight, whereas international benchmarks like the LBMA are beyond the direct control of Indian regulators.
What This Means for Investors
- Improved Clarity: It will be significantly easier to compare different gold or silver ETFs, as “tracking errors” caused by valuation differences will be minimized.
- Refined Returns: During times of extreme global volatility (like the price spikes seen in January 2026), the NAV of Indian ETFs will no longer be “lagging” behind London time. It will react in real-time to domestic demand and supply.
- No Action Required: This is a back-end accounting change for fund houses. You do not need to sell or switch your existing gold/silver ETF units.
Implementation Timeline
- Circular Issued: February 26, 2026.
- Effective Date: April 1, 2026 (aligning with the new SEBI Mutual Funds Regulations, 2026).
- Role of AMFI: The Association of Mutual Funds in India (AMFI) has been tasked with creating a uniform policy to ensure all fund houses transition to the new pricing smoothly.
