Gold exchange-traded funds (ETFs) in India have seen a remarkable surge in popularity, with folio counts jumping 164% over the past three years. This growth significantly outpaced large-cap mutual funds, which saw only a 30% increase in folios during the same period. According to an analysis by OmniScience Capital, gold ETFs recorded a 2.6-fold rise in folios between September 2023 and September 2026, while large-cap funds grew by just 1.3 times.
The assets under management (AUM) for gold ETFs also skyrocketed, reaching nearly half the AUM of large-cap funds. This rapid growth has raised concerns about investors chasing returns rather than adhering to a disciplined asset allocation strategy. OmniScience Capital warns that gold should typically account for only 5-10% of a portfolio, serving as a hedge against inflation.
Ashwini Shami, President and Chief Portfolio Manager at OmniScience Capital, cautioned against FOMO-driven investments. He noted that the aggressive shift toward gold ETFs signals a departure from structured asset allocation. Shami also emphasized the importance of recalibrating expectations, as gold prices may not necessarily rise in tandem with inflation and interest rates in the coming years.
The firm expects temporary support for gold prices from India's upcoming wedding and festive seasons but warns that global factors, such as higher US interest rates, could limit further gains. Investors are advised to consider both physical gold and gold ETF holdings when assessing their overall portfolio allocation.