Sunday, February 1, 2026

Lockers to Demat: Gold ETFs’ 16% Crash Signals India’s Golden Pivot – Buy the Dip Now

By Surekha Ahuja, CA 

India’s gold ETFs, the modern demat alternative to locker jewellery, fell up to 16 percent today, tracking gold’s ₹9,000 per 10g drop to ₹1,43,205 on MCX. Driven by Fed hawkishness and US 10-year yields rising 25 basis points, this is not retail panic. It is a stress-test of India’s historic gold investment pivot.

In 2025, ETF holdings reached a record 95 tonnes, equivalent to ₹1.3 lakh crore in AUM, with inflows up 283 percent year-on-year, supported by the 2024 Budget’s 12.5 percent LTCG tax benefit for one-year holdings.

For chartered accountants, family offices, and MSMEs, the shift is decisive. Demat gold now represents 40 percent of demand, while traditional jewellery has declined by 25 percent, reducing current account pressures and GST leakages. RBI’s 879-tonne reserves, accounting for 11.7 percent of forex backing, provide strong institutional endorsement.

Today’s Crash Data

As of February 1, 2:15 PM IST, the January 31 correction erased YTD gains for top ETFs:

ETFLTPDaily Drop1-Year Return
Quantum Gold₹135.87-6.14%101%
ICICI Pru Gold₹140.31-6.12%99.8%
Nippon Gold BeES₹135.73-6.10%99.3%
Kotak Gold₹136.79-6.12%99.6%
HDFC Gold₹140.07-6.11%98.7%

The correction is explained by:

  • Beta of 1 to spot gold, with no storage drag versus physical gold which incurs 1 percent making charges and 3 percent GST.

  • Rupee depreciation to ₹84.2 per USD.

  • Liquidity advantage: ETFs settle in T+1, while physical gold takes weeks to liquidate.

  • Portfolio impact: 8–10 percent allocation experienced a 2 percent drawdown, while overexposed positions saw 5–7 percent losses.

The data confirms that demat diversification is superior to hoarding, aligned with RBI gold accumulation signaling institutional confidence.

Recommended Strategy: Buy the Dip

For senior investors and family offices:

  • Allocate 8–10 percent of your portfolio to a combination of ETFs and Sovereign Gold Bonds in a 60:40 ratio via SIPs starting today.

  • Target price: ₹1,60,000 per 10g by Q3 2026, representing a 15–18 percent upside.

  • Cap exposure at 12 percent if USDINR exceeds 86.

Rationale:

  • Tax advantage: ETFs taxed at 12.5 percent LTCG for holdings above one year versus 20 percent for physical gold held more than three years.

  • Inflation hedge: CPI at 7.2 percent, positioning ETFs for an 18–22 percent CAGR through 2028.

  • Outperformance: Fixed deposits yield 6.5 percent post-tax; Nifty returned 10.5 percent in 2025.

  • Compliance benefits: Peer-review ready, TDS and GST-efficient, ensures succession liquidity.

  • SGB bonus: 2.5 percent coupon with tax-free maturity over eight years.

Asset Comparison

Asset1-Year ReturnTaxLiquidityCAD ImpactAdvisory
Gold ETFs99–101%12.5% >1yrT+1HighCore Buy
Physical Gold76%20% >3yrWeeksHighFade
Sovereign Gold Bonds102% + 2.5%Tax-freeAnnualZeroDefensive Pair

2026 Outlook

  • Total demand expected at 600–700 tonnes, with jewellery continuing to decline.

  • Customs duties remain at 6 percent, supporting import protection.

  • Scrap prices fell 19 percent in 2025, boosting ETF inflows.

Conclusion: India is experiencing a gold renaissance. The move from lockers to demat provides liquidity, tax efficiency, and institutional alignment.

Rebalance your portfolio today. Delaying may mean missed opportunity.


Union Budget 2026-27: What Really Changed for Taxpayers (And What Didn’t)

 Budget 2026-27 avoids headline tax cuts and instead sharpens compliance under the new Income Tax Act effective April 2026. Here’s a verified snapshot of the changes that actually affect taxpayers—and the ones that don’t.

Union Budget 2026-27: Key Tax & Compliance Updates (Verified)

Union Budget 2026-27 maintains fiscal prudence with targeted tax and procedural refinements rather than sweeping rate cuts. The measures are aligned with the new Income Tax Act (effective 1 April 2026), with a clear emphasis on compliance ease, certainty, and litigation reduction.

Fiscal Context

  • Fiscal deficit target: ~4.5% of GDP for FY27

  • GDP growth projection: ~7.4%

  • Continued capex push, reinforcing long-term macroeconomic stability

Direct Tax Highlights

  • Income tax slabs unchanged under both regimes
    (30% rate continues above ₹24 lakh in the new regime).

  • ITR-1 & ITR-2 filing due date extended to 31 July, easing compliance for salaried individuals and small taxpayers.

  • TCS under LRS reduced to 2% (flat, no threshold) for education, medical expenses, and foreign tour packages—providing relief on overseas remittances and NRI-linked transactions.

  • MACT interest fully exempt for individuals; no TDS, resolving long-standing disputes.

  • Buyback taxation shifted to shareholders, taxable as capital gains (effective impact largely on promoters).

  • One-time foreign asset disclosure window announced; detailed conditions and immunity provisions to be notified.

MSME & Business Compliance

  • No confirmed changes to presumptive taxation limits under Sections 44AD or 44ADA.

  • Budget signals future simplification for digital-first MSMEs, subject to notifications.

  • Rent TDS threshold remains unchanged at ₹2.4 lakh.

Indirect Tax & Market Updates

  • GST rates and structure unchanged.

  • Key deductions unchanged:

    • Section 80C – ₹1.5 lakh

    • Section 24(b) (home loan interest) – ₹2 lakh

  • STT increased to curb speculative trading:

InstrumentEarlierRevised
Futures0.02%0.05%
Options0.10%0.15%

Procedural Reforms

  • Finance Bill 2026 operationalises the new Income Tax Act, strengthening faceless procedures and decriminalising minor defaults.

  • No notified change in pre-deposit percentage for stay of demand or updated return timelines beyond existing provisions.

Key Takeaway

Budget 2026-27 is stability-driven, not populist.
Tax rates remain steady while compliance becomes smoother and more predictable. Relief is selective, market discipline is reinforced, and the tax administration continues its shift toward trust-based enforcement.

Immediate Action Points

  • Review LRS remittances and foreign asset exposure early in FY27

  • Reassess derivatives trading costs post-STT hike

  • Plan July 31 ITR compliance workflows

  • Track notifications under the new Income Tax Act

Based on the Union Budget Speech and Finance Bill, 2026 as presented on 1 February 2026.