Silver’s Shining Run: Why the White Metal Is Surging and What Mutual Fund Investors Should Know

After years of quietly trailing gold, silver has emerged as one of the most dynamic asset classes of 2025, with prices and investor interest soaring to record levels. The rally in the white metal is being fuelled by a combination of robust industrial demand, favourable macroeconomic conditions, and heavy inflows into silver exchange-traded funds (ETFs).

From Precious to Industrial Powerhouse

Once known mainly for its ornamental and cultural value, silver today is a vital industrial commodity. It is an integral input in products ranging from electronic goods, solar panels, and electric vehicles (EVs) to medical instruments, satellites, 5G infrastructure, and the Internet of Things (IoT).

According to the World Silver Survey 2025 published by The Silver Institute, global industrial demand for silver rose 4% in 2024 to 681 million ounces, marking a record high for the fourth consecutive year. As the world shifts toward clean energy, EV adoption, semiconductors, and digital technologies, this demand is expected to accelerate further.

Simply put, silver’s fortunes are increasingly tied to the health of the global industrial cycle. When economic conditions improve and manufacturing activity strengthens, silver tends to outperform — making it a pro-cyclical commodity.

Macro Tailwinds and Currency Boost

The current macroeconomic backdrop is also lending support. With major central banks cutting interest rates to revive growth, liquidity has returned to risk assets — a scenario that historically benefits industrial commodities like silver.

At the same time, a weaker US dollar has made dollar-denominated assets more attractive for global investors, further supporting the rally. Additionally, silver’s relative undervaluation compared to gold — highlighted by the gold-silver ratio once crossing 100 — has encouraged investors to shift part of their precious metal exposure toward silver.

India’s Silver Rush Through ETFs

The Indian silver investment landscape has transformed dramatically in just a few years. Since SEBI permitted mutual funds to launch silver ETFs in November 2021, the category has seen exponential growth.
As of May 2025, assets under management (AUM) in silver ETFs have jumped to ₹16,886 crore across 8.37 lakh folios, according to AMFI data — a remarkable milestone in a short span.

The momentum has only intensified recently. In September 2025, silver ETFs recorded record net inflows of ₹5,341 crore, while their total AUM surged to ₹36,460 crore, up nearly ₹10,000 crore from the previous month. This surge coincided with silver breaching the $50-an-ounce mark globally and domestic prices hitting an all-time high of ₹1.63 lakh per kg.

Premium Panic and AMFI’s Clarification

The frenzied buying has led to an unusual situation where silver ETFs started trading at steep premiums over their indicative net asset values (iNAVs). This premium reflects a short-term demand-supply mismatch as physical silver availability tightens worldwide.

Amid rising investor concern, AMFI Chief Venkat Chalasani clarified that the surge in premiums is a temporary phenomenon, not a structural problem in the domestic ETF ecosystem.
“The spot price is currently higher than futures due to global supply constraints,” he explained, adding that the situation should stabilise once supply catches up.

Some fund houses have already acted prudently. Kotak Mutual Fund temporarily paused lump-sum investments in its Silver ETF Fund of Fund, citing “sharp spot premiums over import parity prices.” Managing Director Nilesh Shah emphasised that the decision was “investor-centric” and aimed at protecting new investors from entering at distorted prices. Systematic investment plans (SIPs) and redemptions, however, remain unaffected.

Performance and Cooling-Off Phase

Despite a minor pullback — with HDFC Silver ETF down 3.9%, Kotak Silver ETF off 2.9%, and Nippon India Silver ETF slipping 1.1% — silver funds remain standout performers.
Even after cooling, silver ETFs have delivered gains of 7–11% in a week and up to 86% so far in 2025, outpacing most asset classes.

The extraordinary inflows have prompted mutual funds to tighten internal risk management frameworks, though AMFI has clarified that no collective directive has been issued and each asset manager will act based on its own policies.

What Should Mutual Fund Investors Do?

For investors, the silver rush is real — but caution is warranted. Silver’s dual nature as both a precious and industrial metal means it can be volatile in the short term, especially when supply bottlenecks or speculative activity distort prices.

Suggestion for investor investors:

• Avoid chasing recent returns or entering during inflated premiums.
• Prefer SIPs in silver ETFs or fund-of-funds to average out entry costs.
• Treat silver as a diversifier, not a core holding, ideally limited to 5–10% of the portfolio.
• Monitor premium-to-NAV differentials before investing in ETFs.

Over the long term, silver’s strong industrial relevance, limited supply, and growing role in green technologies make it a strategic addition for investors seeking exposure beyond gold.

The Bottom Line

Silver’s transformation from a cultural metal to a global industrial asset has reshaped its investment story. Its current rally reflects both structural demand strength and short-term exuberance.
For mutual fund investors, staying disciplined and focusing on long-term fundamentals — rather than momentum — will be key. As AMFI’s chief succinctly put it, the silver rush is real, but the premium panic is temporary.

Market this week

Source: BSE and NSE

• The Indian market extended its winning streak for the second consecutive week, with the Nifty reclaiming the 25,300 level amid supportive global and domestic cues.
• Sentiment was boosted by sustained DII buying, ease in geopolitical tensions, FII participation turning positive, encouraging US–India trade developments, and a strong start to the corporate earnings season.
• On the sectoral front, Nifty Capital Market and IT indices outperformed with 5% gains each, while the Nifty Healthcare index advanced 3%.
• Nifty Realty, Private Bank, Consumer Durables, and Pharma indices gained around 2–2.3%, reflecting broad-based buying interest.
• In contrast, the Nifty Media index declined nearly 3%, emerging as the major laggard of the week.
• On the institutional front, Foreign Institutional Investors (FIIs) turned net buyers after 12 weeks, purchasing equities worth ₹2,975.53 crore.
• Domestic Institutional Investors (DIIs) continued their strong participation, remaining net buyers for the 25th straight week with inflows of ₹8,391.11 crore.

Weekly Leaderboard

Source: BSE

Stocks that made the news this week:

Metal Stocks Slip Despite Broader Market Gains
Metal shares declined on October 10, bucking the positive momentum in the broader market. The Nifty Metal index fell over 1%, emerging as the only sectoral laggard. Hindustan Copper was the top loser, plunging nearly 6% to ₹343.60, followed by Hindustan Zinc, which dropped about 4% to ₹493.50. Other heavyweights like SAIL, NALCO, NMDC, Jindal Steel & Power, and Tata Steel also lost around 2% each, while Vedanta, Hindalco, and JSW Steel slipped close to 1%. Adani Enterprises, APL Apollo Tubes, and Jindal Stainless were among the few gainers in the metal space.

Textile Stocks Rally on Trade Talk Optimism
Textile counters advanced sharply after Prime Minister Narendra Modi said he had spoken with US President Donald Trump, with both leaders reviewing progress in trade discussions. The news rekindled hopes of a possible India–US trade agreement, sparking buying interest in export-oriented textile companies. The prospect of improved trade relations boosted investor sentiment across key textile names.

SpiceJet Rises on Fleet Expansion Plans
Shares of SpiceJet gained over 7% intraday after the airline announced the addition of three new aircraft—an Airbus A340 and two Boeing 737s—to its operational fleet to cater to the growing travel demand this festive season. The stock hit an intraday high of ₹35.59, extending its two-session rally to nearly 22%. The company said that a total of 20 aircraft will be added between October and November under a damp lease model, while four grounded planes will be reintroduced by mid-December, significantly enhancing its capacity.