Silver Outran Gold. India's Silver ETF Buyers Made 18%#

Over the twelve months to July 2026, silver returned 98%. The average Indian investor in a silver exchange-traded fund earned 18%.

That gap is not a fee. It comes from DSP Mutual Fund's Netra report for September 2026, which set the market return on silver against the money-weighted return unitholders took home. The second number is smaller because of when the money turned up. DSP also found that 56% of the capital put into silver ETFs over that year was sitting at a loss.

Silver did outrun gold, and by a distance. In 2025 the LBMA silver price rose 144.82% against gold's 62.90%. India's household money mostly arrived after that, and the metal has spent 2026 going backwards.

What a silver ETF holds, and what its NAV tracks#

A silver ETF is a mutual fund scheme whose units trade on the exchange like a share. SEBI's framework, approved in November 2021, requires at least 95% of assets in physical silver: 30 kg bars of 999 fineness meeting London Bullion Market Association Good Delivery standards, tracking error capped at 2%. Nippon India launched the first one in February 2022. There are now around nineteen, and the largest, Nippon India Silver ETF, held ₹32,223 crore on 11 September 2026 at an expense ratio of 0.49%.

Net asset value, or NAV, is the per-unit value of the silver in the vault. Market price is what a unit fetches on the exchange. When the two drift apart, the difference is a premium or a discount, paid by whoever trades at that moment.

A fund of fund, or FoF, works differently. It buys ETF units on your behalf, so you can invest without a demat account and run a SIP. It adds its own expense ratio on top of the ETF's, and it is taxed on a different clock.

The month everything went in, and the week it went wrong#

The flow data explains the 80-percentage-point gap better than any argument about investor psychology.

Flows from AMFI monthly data as reported by Business Standard, Angel One and Cafemutual. Prices from the LBMA and USAGOLD. Search volumes are Google Ads monthly figures for India, retrieved through DataForSEO on 14 September 2026; Google reports these in rounded bands.

January 2026 was the biggest month the category has ever had, and it was the month silver peaked. The metal touched $121.62 an ounce on 29 January and gave up close to half of that within days. February brought the first monthly outflow in 26 months, ₹826 crore net, on gross redemptions of ₹5,455 crore.

Folios say the same thing from the other direction. Silver ETF accounts went from 11.31 lakh in August 2025 to 47.85 lakh in January 2026. Roughly three in four silver ETF investors in India bought their first units during the five months that ended at the top. The asset was fine. The entry point was not.

Why Indian silver costs about 17% more than London silver#

An Indian silver ETF does not track the London price. It tracks the Indian price, and the two have pulled apart.

On 13 May 2026 the government raised the combined import duty on gold and silver bullion to 15% through Notification 15/2026-Customs: 10% basic customs duty plus a 5% Agriculture Infrastructure and Development Cess. It had been 6% since the July 2024 Budget. Add 3% IGST and the effective landed cost went from roughly 9.2% to about 18.4%. The stated reason was pressure on the trade deficit and on foreign exchange reserves.

You can see the result on any terminal. MCX silver recently quoted around $75 an ounce against an international spot price near $64, a premium of about 17%. Part of that is tax. Part of it is physical scarcity, which is harder to measure and easier to lose money on.

This is also why rupee and dollar returns have diverged. In dollars, silver has fallen from $71.99 at the end of 2025 to roughly $65, a drop of about 10%. In rupees, MCX silver went from a record ₹2.42 lakh per kilogram in late December 2025 to around ₹2.42 lakh today. Duty and the rupee absorbed the fall. That cushion works in reverse if duty is ever cut.

The premium SEBI has now moved inside the NAV#

October 2025 was the warning. With physical silver scarce at home, silver ETFs began trading 5% to 10% above their indicative NAVs. Tata, Axis, Kotak, UTI, SBI and ICICI Prudential suspended fresh subscriptions to their silver FoFs, Tata with effect from 14 October 2025, on the reasoning that taking new money at inflated prices would misprice the scheme. Existing SIPs and redemptions carried on.

SEBI's answer came on 26 February 2026. Circular HO/(68)2026-IMD-POD-2/I/5780/2026 moved the valuation of physical gold and silver in mutual fund schemes off the LBMA morning fix, adjusted for currency, duty and notional premiums, and on to polled spot prices published by recognised Indian exchanges, effective 1 April 2026. The old method depended on a fund manager's judgement about what premium to apply. The new one uses the price at which physically settled domestic contracts actually clear.

Better disclosure, with a consequence worth understanding. The Indian premium now sits inside the NAV rather than on top of it. If domestic tightness eases, or duty is cut, your silver ETF's NAV can fall even when London silver does not move. That is interpretation, not forecast, and nobody can time it.

What the metal's own numbers say#

The fundamentals are mixed rather than dramatic. The Silver Institute's February 2026 forecast expects a sixth consecutive annual market deficit in 2026, though a smaller one, at 67 million ounces. Mine supply is seen rising 1% to 820 million ounces. Industrial demand is forecast to fall 2% to about 650 million ounces, a four-year low, partly because solar manufacturers are thrifting and substituting away from silver. Investment demand is projected up 20% to 227 million ounces, a three-year high.

So the deficit is now driven more by people buying silver than by factories consuming it. Deficits do not set prices by themselves either; they are met from above-ground stocks, which is roughly what happened through 2026.

Cost and tax are where an ETF genuinely beats a coin shop. Total expense ratios on Indian silver ETFs run between about 0.35% and 0.59%. Physical silver carries 3% GST you never recover, making charges on anything shaped, and a dealer's spread when you sell. Listed silver ETF units held more than twelve months are taxed at 12.5% without indexation, while a silver FoF needs twenty-four months for the same rate, under the Finance (No. 2) Act, 2024. Short-term gains are taxed at slab either way.

Interest has deflated rather than vanished. India's searches for "silver etf" ran at 3,01,000 in October 2025 and 14,800 in August 2026, down about 95%. Searches for "silver rate today" fell from 3.72 crore in January to 61.2 lakh in August. Both curves follow the price up and down, which is the problem in miniature.

Key takeaways#

1. Silver's 98% one-year return to July 2026 is not what investors earned. DSP's money-weighted figure is 18%, and 56% of the money invested over that year was underwater.
2. January 2026 was both the largest inflow month the category has recorded, at ₹9,463 crore, and the month silver peaked at $121.62 before falling about 47% in a week.
3. Indian silver trades roughly 17% above the international price. Import duty went from 6% to 15% on 13 May 2026, with 3% IGST on top.
4. Since 1 April 2026 SEBI values scheme silver at domestic polled spot prices, so that premium sits inside the NAV and can compress on its own.
5. On cost and tax an ETF beats physical silver for most buyers, but a listed ETF turns long-term in twelve months against twenty-four for a fund of fund.

Frequently asked questions#

Is a silver ETF safe? There is no credit risk from the fund house, because the scheme holds allocated physical silver under SEBI's rules. There is full price risk. Silver fell close to 47% in a week in early 2026.

Why did my silver ETF fall more than the silver price? Usually because you bought at a premium to NAV, or because the domestic premium narrowed. Compare the market price against the indicative NAV your fund publishes before you trade.

Silver ETF, SILVERBEES, or a fund of fund? SILVERBEES is the ticker for Nippon India's silver ETF, the largest in the category, not a separate product. An ETF needs a demat account and gets long-term tax treatment after twelve months. An FoF needs no demat, allows a SIP, and takes twenty-four months.

How is a silver ETF taxed in India? Listed units held beyond twelve months are taxed at 12.5% without indexation. Below that, gains are added to income and taxed at your slab. Silver FoFs use a twenty-four-month threshold for the same 12.5%.

Should I buy silver now that the price has fallen? This article does not give investment advice. The record shows silver about 46% below its January 2026 peak, an Indian price carrying a 17% premium, and a Silver Institute forecast of shrinking industrial demand this year.

Glossary#

Exchange-traded fund (ETF). A mutual fund scheme whose units are listed and traded on a stock exchange through the day, like a share.

Net asset value (NAV). The per-unit value of what a scheme owns, published daily. Silver ETFs also publish an indicative NAV during market hours.

Premium or discount to NAV. The gap between the exchange price of an ETF unit and the value of the silver behind it. A premium is an extra cost to the buyer.

Fund of fund (FoF). A scheme that invests in units of another scheme. It removes the demat requirement, adds a layer of expense, and changes the tax clock.

Tracking error. How far a fund's returns stray from what it is meant to follow. SEBI caps it at 2% for silver ETFs.

Money-weighted return. A return calculation that accounts for the size and timing of money moving in and out. It shows what investors earned, rather than what the fund returned.

References#

1. DSP Mutual Fund, Netra: Early Signals Through Charts, September 2026
2. LBMA, Precious Metals Market Report: Q4 and Full Year 2025
3. SEBI, Introduction of Silver Exchange Traded Funds in India, board memorandum, November 2021
4. SEBI, Valuation of physical gold and silver held by mutual fund schemes, circular HO/(68)2026-IMD-POD-2/I/5780/2026, 26 February 2026
5. The Silver Institute, Global silver investment to remain strong in 2026 against the backdrop of a sixth consecutive annual market deficit, 10 February 2026
6. TaxGuru, customs duty on gold and silver raised to 15%, effective 13 May 2026, Notification 15/2026-Customs
7. IIFL, silver import duty in India 2026: rates, carrying limits and customs rules
8. TaxGuru, gold ETF, silver ETF and gold or silver mutual fund taxation in India, 18 July 2026
9. Business Today, silver surged 98% but investors made just 18%, 5 September 2026
10. Business Today, gold and silver ETFs beat equity ETFs in FY26, 14 September 2026
11. Angel One, silver ETFs record first outflows in 26 months
12. Business Standard, why mutual funds are freezing silver ETF investments, 14 October 2025
13. Business Standard, gold and silver ETF assets jump fourfold in 2025, top ₹2 trillion, 7 January 2026
14. Business Standard, silver surges 15% in a week, hits record ₹2,42,000 per kg on MCX, 27 December 2025
15. Cafemutual, AMFI monthly data for August 2026
16. IND Money, gold and silver ETF inflows in FY26
17. USAGOLD, daily precious metals market report, 1 September 2026
18. MetalCharts, India silver premium, MCX against COMEX
19. Value Research, Nippon India Silver ETF fund page, data as of 11 September 2026
20. Google Ads search volumes for India, retrieved through DataForSEO, 14 September 2026

This article is journalism, not investment advice. Prices quoted are as of mid-September 2026 and move daily. Consult a qualified adviser about your own position.