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India’s silver exchange-traded funds are suddenly in the spotlight, attracting record inflows and delivering eye-catching returns—but experts warn that the rally may be getting ahead of itself.
According to Reuters, silver ETFs have drawn ₹8,603 crore in inflows during the first eight months of 2025, surpassing last year's total. Some silver ETFs have delivered returns of 50–55% so far this year, according to The Economic Times, far outpacing gold and equity benchmarks. For investors who missed the gold rally, silver has become the new “catch-up” trade.
The surge comes as global silver prices have rallied sharply to $50 per ounce—the highest in more than four decades—driving up returns for silver ETFs in India.
This exuberance has also led to distortions.
Silver ETF Surge
According to a Moneycontrol report, several silver ETFs in India are now trading at a significant premium to their indicative net asset value, meaning investors are paying more than the actual worth of the underlying silver. This is a sign that demand is far outstripping supply, particularly because most silver ETFs back their units with physical silver, which has become harder to source amid tight global supply chains.
The rush to create new ETF units has been hampered by shipping delays and a shortage of deliverable silver bars. As a result, the premiums have widened even further, sparking concern that new investors could face losses if the mismatch corrects.
To be sure, some fund houses are taking steps to protect investors.
Reuters reported that Kotak Mahindra Mutual Fund has suspended new lump-sum and switch-in investments in its Silver ETF Fund of Fund (FoF), citing the difficulty of sourcing physical silver without distorting prices. However, the suspension may not last long, and is likely to be lifted within the next couple of weeks as supply improves after Diwali—a peak time for purchases.
Silver ETFs vs Physical Silver
Analysts say the growing enthusiasm for silver is being driven by a combination of factors. For one, gold prices are at record highs, making silver appear relatively cheaper per ounce. Additionally, silver’s industrial demand—particularly from sectors such as solar energy, electric vehicles, and electronics—has strengthened its investment case.
“Silver has both safe-haven and industrial appeal, making it a dual-purpose asset,” ET Markets quoted a Mumbai-based fund manager as saying. “The industrial side of demand is what differentiates it from gold and gives it a growth edge.”
But the sharp rally has also raised the risk of a correction.
“Be careful while buying silver currently,” a certified financial planner told Business Today. “ETFs are trading at a 15–18% premium to fair value.”
Since silver is more volatile than gold and tends to move in cycles, wealth advisers suggest waiting for premiums to normalise or investing gradually through systematic investment plans. While the long-term demand outlook for silver remains strong, the current frenzy, driven by FOMO rather than fundamentals, may not last.
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