Top 5 Silver Mutual Funds in India
October 24, 2024 Mutual Fund
Silver has emerged as a key investment asset in India in recent years, with investors increasingly looking towards precious metals to diversify their portfolios. In 2024, silver’s role as an alternative investment has gained prominence, driven by the rising demand for commodities and the introduction of innovative investment products such as Silver Exchange Traded Funds (ETFs).
While Silver is often seen as an affordable precious metal compared to gold, the price of silver is now also reaching record high levels, yet it holds immense value both in industrial applications and as a store of wealth. Investors looking to gain exposure to silver in India can do so via Silver Exchange-Traded Funds (ETFs) or mutual funds that focus on this metal.
Growth of Silver As an Investment in India
Traditionally considered a store of value, silver has evolved from being used primarily for jewellery and industrial purposes to a valuable financial asset. With inflation concerns, global uncertainties, and stock market volatility driving investors to look for safer havens, silver has grown in popularity due to its tangible nature and historical significance as a secure asset. It is often seen as a hedge against inflation and currency devaluation. Similar to gold, silver also presents a unique risk-return profile that appeals to a broader range of investors.
Moreover, silver’s industrial applications, particularly in electronics, solar energy, and medical equipment, have increased its global demand, making it a long-term growth asset. Additionally, silver’s affordability compared to gold in terms of quantity makes it an attractive option for investors with smaller portfolios.
The Indian silver market plays a significant role in the global precious metals landscape. Historically, India has been one of the largest consumers and importers of silver, driven by its widespread use in jewellery, religious artifacts, and various industrial applications. Silver demand in India also spikes during festive seasons and weddings, making it a culturally significant commodity.
The price of silver in India is highly influenced by both global and domestic factors. Internationally, silver is traded in US dollars, so fluctuations in the Indian Rupee’s exchange rate against the dollar significantly impact domestic prices. A weaker rupee can make silver more expensive, even if global silver prices remain steady.
Graph: Silver Shines with Rise in Price Over the Long Term
Data as of September 30, 2024
MCX spot price of Silver used.
Past performance is not indicative of future returns.
(Source: MCX, data collated by PersonalFN Research)
In recent years, silver has experienced notable price fluctuations in the Indian market. During the COVID-19 pandemic in 2020, silver saw a sharp surge in demand as investors turned to precious metals to protect their wealth amidst economic uncertainty. Prices crossed Rs 70,000 per kilogram during this period, reflecting both domestic and international demand.
However, following the pandemic, silver prices saw some corrections as the global economy began to stabilise. In 2023 and early 2024, silver prices remained volatile but resilient, hovering around Rs 70,000 to Rs 75,000 per kilogram, influenced by rising inflation, supply chain disruptions, and geopolitical tensions.
Looking ahead, silver prices in India are anticipated to remain volatile due to a combination of industrial demand and global economic factors. The metal’s dual role as both a precious and industrial asset makes it sensitive to a wide range of market forces.
As the Indian economy continues to grow and modernise, particularly with advancements in solar energy and electronics, the demand for silver is poised to remain strong. However, price fluctuations will likely persist, driven by currency movements, global silver supply, and broader economic conditions.
In the past few years, silver has emerged as an attractive investment option, thanks to the launch of Silver Exchange Traded Funds (ETFs) in the Indian mutual fund market, which has opened the door for retail investors to participate in silver investments without the need to physically hold the metal.
Launch of Silver Exchange-traded Funds (ETFs) in India
The introduction of Silver ETFs marks a significant milestone for the Indian mutual fund industry. The Securities and Exchange Board of India (SEBI) gave the green light for mutual fund companies to launch Silver ETFs in 2021, and since then, several asset management companies (AMCs) have launched products focusing on silver.
ICICI Prudential Mutual Fund was one of the first to launch a Silver ETF, followed by offerings from Nippon India Mutual Fund, Aditya Birla Sun Life Mutual Fund, and others. These funds allow investors to gain exposure to the price of silver without the need to physically hold the metal.
Silver ETFs have attracted a diverse investor base, including individuals who traditionally invested in gold ETFs but sought diversification within precious metals. Like other mutual funds, Silver ETFs offer systematic investment plan (SIP) options, allowing investors to accumulate silver exposure gradually.
How Silver ETFs Protect Against Market Fluctuations
Silver’s price movements are often influenced by a mix of industrial demand, economic cycles, and geopolitical uncertainties. Its unique position as both an industrial and precious metal allows it to perform differently from traditional equities or even gold, making it a valuable diversification tool in investment portfolios.
1. Counter-cyclical Asset: During periods of market volatility, precious metals like silver tend to perform well as investors seek safety. When equity markets face corrections or economic conditions weaken, silver’s value may rise, providing a buffer to investors.
2. Portfolio Diversification: Silver has a relatively low correlation with stock and bond markets. Adding silver ETFs to a portfolio can reduce overall portfolio volatility and increase risk-adjusted returns.
3. Inflation Hedge: With persistent inflation, silver serves as a store of value, preserving purchasing power when traditional financial assets lose ground.
4. Geopolitical Hedge: Silver, like other precious metals, tends to gain in value during times of geopolitical tension. In 2024, ongoing uncertainties in global markets make silver a useful hedge against international risks.
Table: Recent Performance of Silver ETFs
| Scheme Name | Absolute (%) | CAGR (%) | ||
| 3 Months | 6 Months | 1 Year | 2 Years | |
| HDFC Silver ETF | 4.98 | 9.99 | 14.71 | 24.54 |
| Axis Silver ETF | 4.71 | 9.75 | 14.59 | 24.69 |
| Nippon India Silver ETF | 4.76 | 9.68 | 14.34 | 15.92 |
| ICICI Pru Silver ETF | 4.77 | 9.81 | 14.33 | 15.97 |
| DSP Silver ETF | 4.79 | 9.68 | 14.21 | 23.51 |
| Aditya Birla SL Silver ETF | 4.80 | 9.53 | 13.54 | 16.17 |
| Kotak Silver ETF | 4.79 | 9.83 | 12.03 | – |
| UTI Silver ETF | 4.67 | 9.57 | 9.78 | – |
| Mirae Asset Silver ETF | 4.80 | 9.86 | 7.62 | – |
| Edelweiss Silver ETF | 4.88 | 8.53 | – | – |
| Tata Silver ETF | 5.72 | 5.98 | – | – |
| Category Average – Silver | 4.47 | 9.29 | 12.79 | 20.13 |
Data as of October 23, 202
4Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
Investing in silver through mutual funds, particularly Silver ETFs, offers several advantages that make it an appealing choice for investors. Silver ETFs allow investors to invest in silver without worrying about storage or physical security. They also come with a lower cost of entry than purchasing physical silver.
Unlike physical silver, which may be difficult to sell quickly, Silver ETFs are traded on stock exchanges, providing liquidity and ease of transactions. Investors can avoid the costs associated with buying and storing physical silver, such as storage fees, security, and making charges.
Since Silver ETFs are regulated by SEBI, they offer transparency and protection to investors, ensuring that the silver assets are held securely. For investors already holding gold ETFs, adding Silver ETFs can enhance portfolio diversification within the precious metals asset class. Silver offers different risk-return dynamics compared to gold.
Let us have a look at the top 5 silver mutual funds or ETFs available in India, their key features, benefits, and why they might be a good addition to your portfolio.
HDFC Silver ETF is a popular fund offering direct exposure to the price movements of silver in the domestic market. HDFC Mutual Fund has a strong track record in managing a range of asset classes, and this silver ETF is a recent addition to their growing portfolio of commodity ETFs.
Launched in September 2022, the fund currently holds an AUM of Rs 320.58 crores. Silver’s dual role as an industrial metal and an investment asset helps the HDFC Silver ETF navigate market fluctuations effectively. The fund has shown consistent tracking of silver prices, making it a valuable tool for hedging against market volatility.
Axis Silver ETF is a newly launched offering from Axis Mutual Fund, one of the fastest-growing asset management companies in India. This ETF provides an efficient way to invest in silver, which is gaining popularity as an alternative asset class among Indian investors.
The scheme currently holds an AUM of Rs 136.98 crores. Axis Silver ETF has rapidly gained attention due to its robust tracking and minimal tracking error. It offers investors the ability to take advantage of silver price movements while avoiding the issues of silver storage and security.
Axis Mutual Fund’s strong track record in managing ETFs with high liquidity and low costs offers investors an easy entry point into the precious metals market without directly owning physical silver.
Nippon India Silver ETF offers investors a convenient way to gain exposure to the performance of silver prices. By tracking the domestic price of silver, this ETF provides a seamless opportunity for investors to benefit from the rising demand for silver in both industrial and investment markets.
Launched in February 2022, the scheme currently holds an AUM of Rs 4,476.82 crores. The scheme is suitable for investors who are looking for direct exposure to silver but do not want the hassle of buying and storing physical silver.
Nippon India Silver ETF has emerged as a strong player in the silver investment space, offering consistent returns since its inception. Silver is in high demand in industrial sectors like electronics and renewable energy, making it a key driver for long-term appreciation.
Launched as part of the ICICI Prudential’s ETF offerings in January 2022, the ICICI Prudential Silver ETF tracks the price of silver in the domestic market. As one of the largest asset management companies in India, ICICI Prudential offers this fund to cater to investors seeking a diversified precious metals portfolio.
The scheme currently holds an AUM of Rs 3,714.26 crores. ICICI Prudential’s Silver ETF has gained popularity as a stable investment vehicle for investors looking to benefit from silver’s role in industries such as medical equipment and renewable energy technologies like solar panels.
DSP Silver ETF aims to track the price of silver by investing in physical silver. The fund provides a way to invest in silver without the challenges of storage and purity associated with physical holdings. Launched in August 2022, the scheme currently holds an AUM of Rs 231.11 crores.
DSP Silver ETF offers a straightforward way to invest in silver without the complexities of physical ownership. Its low expense ratio, coupled with the liquidity of being an ETF, makes it a compelling option for investors interested in gaining exposure to silver as part of their investment strategy.
To conclude…
As silver continues to gain traction as a valuable investment asset in India, the availability of dedicated silver mutual funds and ETFs offers investors a convenient and efficient way to gain exposure to this precious metal. The top five silver mutual funds highlighted in this article each provide unique benefits and performance characteristics that can suit various investment strategies.
However, it is essential to conduct thorough research, consider market conditions, and align investments with individual financial goals before making any investment decisions. With the growing industrial demand for silver and its potential as a safe-haven asset, investing in silver mutual funds can be a strategic addition to a well-rounded investment portfolio.
This article first appeared on PersonalFN here
