India’s securities regulator has introduced a significant change in how mutual funds and exchange-traded funds (ETFs) value their gold and silver holdings, a move that could reshape bullion price discovery in the country and reflect tightening global silver supplies more accurately.
According to a circular issued on February 26, 2026, the Securities and Exchange Board of India (SEBI) has directed funds to value physical bullion using domestic polled spot prices published by Indian exchanges, particularly the benchmark used by the Multi Commodity Exchange (MCX). Previously, many funds relied on the London Bullion Market Association (LBMA) AM fixing price, adjusting it manually for currency conversion, import duties, taxes, logistics and local market premiums.
The shift is expected to bring ETF valuations closer to real market conditions in India by reflecting local demand, import costs and physical supply dynamics rather than relying solely on international benchmarks.
Why the change matters
The new rule marks a step toward domestic price discovery in precious metals. By aligning ETF valuation with MCX spot benchmarks, the regulator aims to reduce subjectivity in pricing adjustments and ensure that fund net asset values better reflect the Indian physical bullion market.
India’s precious metals market is influenced by several domestic factors including import duties, seasonal jewellery demand, logistics costs and local supply availability. The updated valuation method helps ensure that these factors are properly reflected in financial instruments linked to bullion.
Global silver market tightening
The regulatory change also comes at a time when the global silver market is experiencing structural supply deficits. Demand for silver has surged due to its use in solar panels, electric vehicles, electronics and expanding data infrastructure, while supply growth has remained limited because most silver production occurs as a by-product of base-metal mining.
Another indicator of tightening supply has been declining registered inventories in the COMEX silver system, which represents metal available for delivery against futures contracts. A reduction in such inventories signals a smaller buffer available to meet physical delivery demand.
Rising importance of regional bullion markets
While global benchmarks such as LBMA in London and COMEX in the United States remain influential, analysts say the precious metals market is gradually becoming multi-centered. Asian demand hubs like Shanghai and India’s MCX are increasingly playing a larger role in determining prices due to strong regional physical demand.
India has also been strengthening its commodities infrastructure in recent years through the development of bullion exchanges, expansion of physical settlement mechanisms and growth in gold and silver ETFs.
What it means for India
As one of the world’s largest consumers of silver, India is highly sensitive to global supply shortages. When international supplies tighten, domestic inventories can decline quickly and local premiums for physical metal can surge.
The move toward MCX-based pricing could therefore help financial markets reflect the true replacement cost of bullion in India, especially during periods of supply disruption.