Metal ETFs: meaning, key options in India, considerations and top players

Most Indian investors who want exposure to metals have historically thought about it in two ways. Buy physical gold or silver, with all the storage and purity concerns that come with it. Or pick individual stocks in companies like Tata Steel or Hindalco and take on single-stock risk along with the commodity exposure. Metal ETFs offer a third path that sits between these two and is worth understanding properly.

What metal ETFs actually are

A metal ETF is an exchange-traded fund that gives investors exposure to metals, either by holding physical metal directly or by tracking an index of metal and mining companies. The units trade on stock exchanges, priced in real time, and can be bought or sold through a standard demat and trading account like any other listed security.

In India, the metal ETF universe broadly splits into two distinct types and conflating them leads to confusion.

The first type tracks physical precious metals. Gold ETFs hold actual gold in custodian vaults. Silver ETFs hold physical silver. The NAV of these funds moves almost entirely with the domestic price of the respective metal. They are commodity exposure instruments, not equity instruments.

The second type tracks the Nifty Metal Index, which is an equity index comprising listed Indian companies in steel, aluminium, copper, zinc, and mining. These ETFs hold stocks, not physical metal. Their returns are driven by company earnings, operational performance, and commodity prices together. A steel company's stock does not move in a one-to-one relationship with steel prices.

Understanding which type you are buying matters more than most investors realise before they invest.

Key metal ETFs available in India

The category of Gold ETF is by far the largest one in terms of size and reputation. Even just in Gold ETFs, the total asset under management went past Rs. 1 lakh crore in 2025. Some of the major products are Nippon India ETF Gold BeES, SBI Gold ETF, HDFC Gold ETF, Kotak Gold ETF, and ICICI Prudential Gold ETF. They represent one gram of gold for each unit. Some of the major Gold ETFs like LIC MF Gold ETF, UTI Gold ETF, and HDFC Gold ETF gave three-year CAGRs in the range of 22-23%, with lower volatility than that of Silver at 14%.

Silver ETFs are a relatively new addition, being launched after SEBI had approved their launch in 2021. Silver ETFs experienced large inflows following sharp increases in international prices of over 20% in 2024. Some examples of silver ETFs are Nippon India Silver ETF, ICICI Prudential Silver ETF, Axis Silver ETF, HDFC Silver ETF, and DSP Silver ETF. Each unit in a silver ETF corresponds to 1 gram of the price of silver at the domestic level. Silver ETFs like Axis Silver, HDFC Silver, DSP Silver, and Aditya Birla SL Silver ETF have recorded three-year CAGR figures ranging between 22% and 35%, albeit with greater volatility, as indicated by annualised standard deviation figures exceeding 24%.

The ETFs Nifty Metal Index hold stocks of companies that are into metals and mining operations in India. The composition of Nifty Metal Index holds companies operating in areas like steel, aluminum, copper, and mining. Some of the good examples of such ETFs include Mirae Asset Nifty Metal ETF.

Key considerations before investing

Understand what you are tracking. The two metal ETFs described here are entirely different investments even though they share the name. One is an ETF that tracks the price of a metal, while the other is an ETF tracking companies whose profits are affected by the metal price.

Expense ratio and tracking error. With respect to metal exchange-traded funds (ETFs), being that they are passive investments, the expense ratio becomes the main determinant of costs to look at, where lower always means better, all else equal. The tracking error shows how accurately the ETF tracks the performance of its relevant benchmark. High tracking error indicates significant deviation in returns relative to what the ETF is meant to mirror.

Liquidity on the exchange. There are some metal ETFs, especially smaller silver ETFs and sector ETFs, that lack trading activity on the exchange. The large gap between the bid and ask makes it more costly to trade in the ETF. It is recommended to review average daily volumes traded before investing in the lesser-known ETF.

Tax treatment.ETFs in metals, such as those containing gold and silver, are considered debt-like investments under Section 44 and thus taxed as debt instruments in capital gains taxation. The profit made by such investment is included in the income stream and taxed using the relevant slab rates irrespective of the time held. Unlike other ETFs in equity, which are considered long-term after 12 months, the return must be adjusted for taxes.

Cyclicality of base metal equities. This industry has very high cyclicality, which implies that the performance of this industry will depend upon the prices of commodities, the economic situation around the world, and government policies. There could also be an effect of geopolitical changes, export/import policies, and currencies on returns from the ETF.

Top players in India's metal ETF space

Among those AMCs having substantial exposure to metal ETFs in India is Nippon India Mutual Fund, which manages one of the oldest and largest gold ETFs in India in addition to a silver ETF. Another AMC which has substantial AUM in both gold and silver ETFs is ICICI Prudential Asset Management. The ICICI Pru Silver ETF has a size in excess of Rs. 4,000 crore, placing it among the biggest in this sub-category.

SBI Mutual Fund, HDFC Mutual Fund, Kotak Mahindra AMC, Axis Mutual Fund, DSP Mutual Fund, and Aditya Birla Sun Life AMC all operate gold or silver ETF products with varying AUM sizes. For Nifty Metal Index exposure, Mirae Asset is among the more active players.

Conclusion

Metal ETFs in India serve a specific and legitimate role in a portfolio, whether as a hedge against currency and inflation risk through gold, as an industrial demand play through silver's dual precious and industrial nature, or as broad sector exposure through Nifty Metal Index ETFs. The considerations around expense ratio, liquidity, tax treatment, and the distinction between physical metal funds and equity-based metal funds deserve careful attention before allocation. These are not complex instruments, but they are easy to misuse if the underlying structure is not understood clearly.