With precious metal prices hovering near it multi-year highs and global economic uncertainty persisting, it’s clear that investors are increasingly turning to SEBI-regulated gold and silver Exchange Traded Fund (ETFs). These investment vehicles offer unmatched transparency, ease of access, and robust regulatory oversight.
In February 2026, silver ETFs in India presently are generating substantial attention, fueled by market volatility, new product launches, and SEBI reforms. With 150%+ returns over the last year, retail investors are actively engaging despite market corrections, according to brokerage reports.
For those seeking a clear understanding of this investment instrument, it’s essential to dive deep into the intricacies of Silver ETFs and all their facets.
What is a Silver ETF?
A Silver ETF is an exchange-traded fund that is listed on stock exchanges like NSE and BSE. It tracks the price of physical silver, usually 99.9% pure bars that meet LBMA standards. This means you gain exposure to silver without actually owning the metal.
In India, the first silver ETFs launched in 2022 after SEBI allowed mutual funds to create them. These ETFs store physical silver in safe vaults, and their Net Asset Value (NAV) changes based on the silver price in the local market, usually linked to MCX prices.
Investors can buy and sell ETF units on stock exchanges just like regular shares. This way, they do not have to worry about storing silver, ensuring its purity, or paying for insurance.
By 2025, Indian silver ETFs managed thousands of crores in assets, showing a growing interest from investors due to global demand and economic uncertainty. For those looking for a regulated way to invest in silver, silver ETFs offer liquidity, transparency, and easy access through demat accounts.
How does it work?
Fund houses invest at least 95% of their assets in physical silver held in secure vaults by custodians like Brink’s. They may invest up to 10% in silver derivatives. The NAV reflects the current silver prices (from MCX), minus low expense ratios of around 0.3% to 1%. Investors can buy or sell units through their demat accounts during market hours, which provides high liquidity.
SEBI price band proposal details for Silver ETFs
On Friday, February 14, SEBI proposed to set price bands of +/-20% on gold and silver ETFs. This limit will also consider how much these metals fluctuate in international markets. SEBI is suggesting similar price limits for ETFs based on debt and equity indices.
In a seven-page consultation paper, SEBI said the initial price band for gold and silver ETFs would be +/-6%. This limit can increase up to +/-20% during the trading day, but only after a cooling-off period. This proposal aims to promote market stability and boost investor confidence as metal prices change.
Types of Silver ETFs
Physically-backed Silver ETFS
Investors who want direct exposure to silver prefer physically-backed Silver ETFs because they don’t have to handle the metal physically. Silver ETFs allow for easy investment in silver without managing physical ownership. On the other hand, mutual funds offer a wider investment strategy and provide diversified exposure across different asset classes.
Futures-based Silver ETFs
Instead of owning physical silver, these ETFs invest in silver futures contracts. These are agreements to buy silver at a later date. Since these contracts expire, fund managers need to keep buying new contracts to keep their silver investments. This can create some risks related to market changes and the need to roll over contracts.
Is Silver ETF a high risk instrument?
Silver ETFs are considered high risk mainly because silver prices can be very volatile. Unlike gold, about 50–55% of silver demand comes from industries like solar power, electronics, electric vehicles, and semiconductors. This reliance on industrial use makes silver prices sensitive to changes in the global economy.
Historically, silver has been more volatile than gold, often experiencing significant price swings in short periods. Several factors influence silver prices, including the strength of the US dollar, expectations for US interest rates, and speculative trading on markets like COMEX.
This means that while silver ETFs can rise sharply during good times for commodities, they can also fall quickly. Therefore, it is important for investors to be disciplined when allocating funds to silver ETFs.
Which ETF is better, gold or silver?
Harshal Dasani, Business Head, INVasset PMS, explained that the choice between gold and silver ETFs depends on an investor’s objective and risk appetite.
Dasani added that gold is primarily a monetary metal and safe-haven asset, with central banks holding it as reserves. Its demand is relatively stable, making gold ETFs comparatively less volatile. Silver, on the other hand, has a dual role—precious and industrial—which makes it more cyclical. In phases of economic expansion and green energy growth, silver can outperform gold due to rising industrial consumption.
“However, during risk-off environments, gold tends to hold value better. Historically, silver has shown higher beta relative to gold, amplifying both gains and losses. Conservative investors typically prefer gold ETFs for portfolio stability, while tactical or aggressive investors may allocate selectively to silver ETFs to capture commodity upcycles,” said Harshal.
How are Silver ETFs taxed in India?
Silver ETFs are taxed as non-equity mutual funds in India. Under current tax rules applicable from April 2023 onwards, gains from non-equity funds—where equity exposure is below 35%—are taxed at the investor’s applicable income tax slab rate, irrespective of the holding period.
Harshal Dasani explained that This means the earlier indexation benefit available for long-term capital gains no longer applies to newly purchased units. Short-term and long-term gains are both treated similarly for taxation purposes. Dividend income, if any, is also added to the investor’s income and taxed as per slab rates. Investors should also factor in securities transaction tax and brokerage charges while calculating net returns.
“Given the tax structure, silver ETFs are better suited as tactical allocations rather than long-term tax-efficient compounding vehicles compared to equity-oriented funds,” opined Dasani.
Key Risks
Price fluctuations: Industrial demand, market mood, and geopolitical developments can all affect silver prices.
Limited control: You don’t have direct control over the silver assets when you invest through a fund; instead, you are dependent on the fund manager’s plan.
Tracking error: Occasionally, expenses and inefficiencies cause the ETF to not move in lockstep with silver prices.
Risks to the counterparty: Using derivatives increases the possibility that the counterparty may not fulfill their end of the bargain.
Tax burden: Since silver ETFs are treated as debt securities rather than equity mutual funds, short-term investors may have to pay more in taxes.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.
