Silver futures on the Multi Commodity Exchange achieved a historic milestone on Monday, surging past ₹3.00 lakh per kg as investors sought refuge in precious metals amid global uncertainty. The record-breaking rally reflects silver's renewed appeal as a hedge, but HDFC Securities has issued a cautionary note about potential policy-driven headwinds that could impact domestic prices in the near term.

Budget Policy Risk Threatens Rally Momentum

HDFC Securities warned that any reduction in import duties during the upcoming Union Budget could create immediate pressure on domestic silver prices, despite the metal's strong underlying fundamentals. The brokerage noted that while structural drivers for precious metals remain firmly intact, fiscal policy changes could act as a short-term headwind for Indian markets.

"However, if the government reduces import duties on gold and silver in the upcoming budget, domestic prices could come under pressure and could act as a short-term headwind for domestic prices," HDFC Securities stated in its research report.

Any duty reduction would mechanically lower landed costs, potentially triggering profit-taking after the metal's steep run-up, even if global benchmarks remain elevated.

Supply Deficit Drives Fundamental Strength

The silver market continues to face significant supply-demand imbalances that support higher prices. HDFC Securities highlighted critical market dynamics that underpin the metal's bullish trajectory:

Industrial demand has remained at record levels while investment inflows and inventory drawdowns across major global hubs have further tightened market conditions. The sharp compression in the gold-silver ratio from around 90:1 in early 2025 to approximately 57:1 indicates silver's outperformance relative to gold.

Long-Term Outlook Remains Constructive

Despite flagging budget-related risks, HDFC Securities maintained a constructive medium-term to long-term view on silver. The brokerage expects the broader bullish trend in precious metals to extend into 2026, supported by several key factors:

• Robust industrial usage maintaining demand floors
• Persistent global supply deficits
• Dovish monetary policy expectations
• Structural demand from investors and institutions
• Ongoing geopolitical risks and trade-policy uncertainty

The brokerage noted that structural demand from institutional investors has created a price floor, while geopolitical tensions continue to underpin safe-haven demand for precious metals.

Investment Recommendations and Strategy

HDFC Securities recommended that investors allocate up to 10% of their portfolios to precious metals, with flexibility to increase exposure based on individual risk appetite. The brokerage suggested that investors can capture the bullish trend through exchange-traded funds while remaining mindful of potential policy-driven volatility.

The recommendation comes as silver's surge reflects a powerful combination of supply constraints, industrial demand, and investment flows. However, the sustainability of record levels in the domestic market may depend significantly on government policy decisions regarding import duties in the upcoming budget.

For Indian investors, the interplay between global fundamentals and domestic fiscal policy will likely determine silver's near-term trajectory, even as long-term structural factors continue to support higher prices.

India's commodity trading landscape has experienced a dramatic transformation over recent years, driven primarily by an unprecedented rally in precious metals that has reshaped market dynamics and broker competition. Zerodha CEO Nithin Kamath highlighted this shift in a detailed analysis, revealing how gold and silver have evolved from afterthoughts to dominant forces in the Multi Commodity Exchange (MCX).

Precious Metals Dominate MCX Trading

The transformation of India's commodity markets represents a stark departure from historical patterns. Kamath explained that commodity trading was previously considered an afterthought by most retail investors due to thin liquidity compared to NSE futures and options. However, the spectacular rally in gold and silver has fundamentally altered this dynamic.

The scale of precious metals' dominance in MCX trading volumes has reached unprecedented levels. Kamath described the current percentage share of gold and silver in total MCX trading volumes as "kind of crazy," indicating the magnitude of this shift. This surge has not benefited the entire commodity complex equally, with the increase coming primarily at the expense of other commodities like crude oil.

Market Performance and Record Highs

The precious metals rally reached new milestones on Monday, demonstrating the continued strength of this trend:

The rally reflects global investor sentiment as market participants return to safe-haven assets amid geopolitical uncertainties, reinforcing the appeal of precious metals in the current environment.

Impact on Broker Market Shares

The commodity trading boom has created competitive challenges and opportunities for brokerage firms. Zerodha experienced a notable impact on its market share during the initial phase of the precious metals surge. The company's delayed implementation of the single trading ledger facility put it at a disadvantage compared to competitors who offered this feature earlier.

The single trading ledger facility allows investors to use the same funds across NSE, BSE, and MCX platforms, providing greater flexibility and convenience for traders looking to diversify across equity and commodity markets. Kamath acknowledged that Zerodha was among the last major brokers to offer this capability, resulting in a temporary loss of market share.

Recovery and Strategic Response

Despite the initial setback, Zerodha has been steadily recovering its position in the commodity trading space. The company's market share has been "inching back up" as it addressed infrastructure gaps and enhanced its commodity trading offerings. This recovery demonstrates the dynamic nature of the brokerage industry and the importance of technological capabilities in capturing market opportunities.

Kamath emphasized the unexpected nature of the volume growth, stating that he would not have predicted such dramatic changes a few years ago. This acknowledgment highlights how rapidly market conditions can evolve and create new opportunities in previously overlooked segments.

Focus on Investor Education

Recognizing the surge in retail participation in commodity markets, Zerodha is expanding its educational initiatives. The company is developing live programmes on commodities trading for its Zerodha Varsity platform, aimed at helping investors understand the complexities and opportunities in commodity markets. This educational focus reflects the growing need for investor awareness as more retail participants enter the commodity trading space.

Market Implications

The transformation of India's commodity trading landscape represents a significant shift in investor behavior and market structure. The concentration of trading activity in precious metals, while creating opportunities, also raises questions about market diversification and liquidity distribution across different commodity segments. The redistribution of trading interest from traditional commodities like crude oil to precious metals indicates changing investor priorities and risk preferences in the current economic environment.