Sebi Expands MF Categories Explained: Gold & Silver Now Inside Equity Mutual Funds!

The changes SEBI is implementing are a game-changer in regard to how to think about diversification. On 26 February 2026, SEBI announced that from this date, equity mutual funds will be allowed to invest in gold and silver. This is the first time that including commodities in equity schemes is allowed. 

This is a part of the SEBI mutual fund reform, which is aimed at improving flexibility, reducing portfolio overlaps, and achieving true-to-label investing. For those interested in India MF news, this update provides a way to invest in commodities through Mutual Funds without having to invest in schemes that are solely focused on gold and silver.

What will this mean for your investments? In this guide, we’ll cover gold silver equity mutual funds, how commodity exposure will work in equity funds, and what the SEBI new MF rules 2026 will do to Mutual Funds in India. This will give you the information you need to understand these changes to the Mutual Funds and how to improve your portfolio in relation to these changes.

New SEBI MF Changes

The SEBI MF category update is a change of more than just a few categories. Each of the previous mutual fund schemes had a maximum of 36 categories. For SEBI, the available maximum is now 40, allowing for the introduction of new types such as life cycle funds, while removing old types like solution-oriented schemes (which include retirement and children’s funds). This new change gets rid of the problem of multiple different funds making the same investments and helps ensure funds remain true to the fund’s objective.

The most important change here is that actively managed equity funds may now include gold and silver instruments for up to 35% of their “residual” of their portfolios. This means that fund managers may now invest in gold and silver, in addition to the equity (which typically needs to be 65% - 80%) of the portfolio. Also, hybrid schemes now have more flexibility and may invest in gold and silver ETFs to hedge against market volatility.

Why is this happening now? India's AUM in mutual funds crossed the $900 billion mark, with an increase in the number of mutual funds offered to retail investors. With global inflation, geopolitical risks, and other uncertainties, investors are looking for safe havens for capital. SEBI's regulations are a response to investor sentiment to allow for more investment diversification. In addition to modernising India's mutual fund industry, these regulations also reposition India as a more favourable destination for international investors.

The Inclusion of Gold and Silver in Equity Mutual Funds  

The addition of gold and silver to equity mutual funds is the most highly anticipated change of the new SEBI MF regulations of 2026. Equity funds have always been focused exclusively on stock investments and have, until now, been required to utilise other funds or ETFs that are focused on gold and silver. Now, they can add these to the equity funds, which allows for the integration of commodity exposure in equity funds.

For example, large-cap equity funds are required to invest a minimum of 80% of the fund in the top 100 companies and can invest the remaining 20% in gold and silver. The same holds true for mid and small-caps. Although there are limits placed by SEBI to prevent large caps and other funds from becoming too imbalanced with these investments, the amount is a significant increase from previous regulations that have limited or no commodity investments in equity funds.

While stock markets continue to perform poorly and economies weaken, intrinsic value assets, including gold and silver, tend to appreciate, thereby providing insulation. With respect to India MF news, amidst a backdrop of price-appreciating gold and silver, gold has done well as investors worry about inflation. Additionally, because silver is needed as a component of many electronics and renewable energy systems, silver has a growing demand as well.

Additionally, the same set of rules applies to hybrid funds in which the residual portions may be invested in gold and/or silver ETFs or exchange-traded commodity derivatives (ETCDs). For cautious investors, this may be a step toward achieving a desired level of exposure to gold or silver. Lastly, life cycle funds may be a new and appropriate option to consider for those with a retirement goal, as it has been specified that they may include a gold or silver ETF allocation of 10%.

Consequences of Including Commodities in Equity Funds

Inclusion of commodities in equity funds is a game changer for both fund managers and investors, as it enables further diversification. Equity markets tend to be volatile, but gold and silver usually have an inverse price relationship to stocks, which should help reduce the overall level of risk. As an example, gold was the key reason why many portfolios were protected during the downturn that occurred in 2022.

From the fund manager's standpoint, the flexibility means they can make appropriate tactical decisions based on the signals in different markets. For example, they can move into gold when equities are being sold off, or into silver when industrial demand increases. The manager can achieve a better risk-adjusted return, which can further increase inflows into equity funds.

On the other hand, concrete challenges exist. Equity funds' exposure to commodities adds a new layer of risk in terms of pricing due to the global influences from the US Federal Reserve and other supply chain disruptions over which we have no control. To some extent, this has been addressed through the "true-to-label" regime, which, from a SEBI perspective, limits the extent to which funds can deviate from their stated objectives. Furthermore, the overlap in portfolios is, from a regulatory standpoint, capped at 50% for thematic and other equity funds, which is aimed at true differentiation.

This is a time when retail investors have more options, but they will have to do some homework. Not all equity funds will, in fact, obtain gold and silver, as this will be dependent on the overall strategy of the fund house. Investors will have to read the SID because this is where the allocation will be detailed.

Changes SEBI New MF Rules 2026

The SEBI new MF rules 2026 involve various new changes apart from commodities. This includes one major reform, which is life cycle funds, which use a glide path strategy because they start off with a high exposure to equities, and debt is added as the start date nears. These funds can be from 5 years to 30 years and can include up to 10% exposures to gold and silver, making these funds a good option for goal-based investing.

SEBI has also barred solution-oriented funds which cause existing schemes to stop taking new subscriptions immediately. This helps with the streamlining of the category list to reduce some of the confusion. In debt funds, new sectoral subdivisions of the categories have been created which give more options for investment in bonds for a particular sector, such as energy and infrastructure.

The valuation rules have also been revised. Starting 1st April 2026, the mutual funds that own physical gold and silver will have their holdings valued based on the spot prices of gold and silver retrieved from the stock exchanges, and will not use the prices based on the London Bullion Market Association (LBMA) anymore. This will allow for more transparent pricing.

Overall, these changes are new SEBI mutual fund reforms aimed at a maturing industry. SEBI has been very active in the industry due to the rapid growth of AUM in the industry and is focused on responding to mis-selling and protecting the investors.

Investor Benefits in a New Era

The SEBI MF category update has brought in some actual gains. First, diversification can be simpler. Now, investors can have a single mutual fund scheme instead of separate ones for gold silver, and equity mutual funds. Investors will be saving costs, and especially during inflation, retaining purchasing power becomes important.

Second, with the update, there will be a boost with more targeted investing with life cycle funds. Consider a 30-year fund that starts with 80-100% of its equity, and silver is added for strength in retaining value and then 5-20% is added near maturity. This is automated rebalancing and is ideal for those who wish for a set-and-forget approach.

Third, the potential return can be much higher. Funds in equities can have commodity exposure and use them to do bull trades in the metal. This could be highly attractive to foreign institutional investors (FIIs) and improve liquidity.

India MF news

Finally, the update will improve the reliability of the caps and the true-to-label rules so that funds do what they say, and the transparency of the funds will ease trusting them.

Conclusion

By incorporating gold and silver equity mutual funds and permitting commodity exposure in equity funds, the SEBI MF category upgrade transforms mutual funds. More flexibility and protection are promised by this SEBI mutual fund reform under the new MF regulations 2026. These improvements present chances to create robust portfolios, regardless of your level of experience with Indian mutual funds.

DISCLAIMER: This blog is NOT any buy or sell recommendation. No investment or trading advice is given. The content is purely for educational and information purposes only. Always consult your eligible financial advisor for investment-related decisions.