Lower imports by the world's biggest silver consumer could weigh on global prices that have risen more than 50% so far in 2020.
"Investors, who bought silver at higher levels, got an opportunity to exit after a long time. For some, even after a decade," said Chirag Thakkar, CEO of Amrapali Group Gujarat, a leading silver importer.
Their selling will reduce import requirement for 2020 to 3,000 tonnes, the lowest since 2012, he said.
India imported 5,598 tonnes of silver in 2019, according to data compiled by Refinitiv GFMS. The country fulfills most of its silver requirement through imports.
Investors are sceptical whether silver will hold recent gains, said Prithviraj Kothari, managing director of RiddiSiddhi Bullions.
"There is rush from sellers but very few buyers are there. Sellers are forced to accept hefty discount," he said.
Local silver futures were trading around 66,800 rupees per kg on Thursday afternoon after hitting a record high of 77,949 rupees earlier this month.
But in the spot market silver was offered at discount of more than 5,000 rupees per kg due to weak demand, Thakkar said.
India's silver imports in the first seven months of the year nearly halved from a year ago to 1,900 tonnes and it is unlikely to rise again unless prices correct sharply, said a Mumbai based dealer with a bullion importing bank.
Demand from jewellery and industry is negligible as millions of people have lost or have to accept a pay cut, said the dealer, adding: "Sentiments are very weak in retail market."
By Rajendra Jadhav