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The Reserve Bank of India's (RBI) restrictions on import of gold has also hit gold exchange traded products (ETF). Fund managers are finding it increasingly difficult to find physical supply of gold needed to deploy inflows into such schemes.
Also, the surging premiums in domestic gold prices (compared to international prices) coupled with the weak rupee is adding to the woes of fund houses operating gold ETFs.
Last week, India's largest fund house Reliance Mutual Fund announced suspension of its gold savings scheme, which at its peak had a corpus of more than Rs 3,000 crore.
Industry sources say more asset management companies are mulling similar moves.
"Most sources to deploy funds into gold funds been virtually been cut off. Earlier, we could buy from banks or authorized agencies but now they can only sell to jewellers. State trading houses import only for exporters. Only option left is jewellers--but that's very difficult," said an official with a fund house.
