On Tuesday, the capital markets regulator said that mutual funds would soon be allowed to trade in commodity derivatives. "The participation of mutual funds is in an advanced stage of examination" , said Mohanty, SBI executive director. He further said, "We have taken the feedback. On the basis of that, we will finalise the regulatory mechanism". The decision on the mutual funds participation shall be finalized in the next six months time.
The trading in commodity futures is also to be boosted with the participation of foreign trading houses that import or export from India or PMS. Earlier AIFs or category III Alternative Investment Funds were allowed to trade and invest in commodity derivatives.
As the FMC which looks autonomously on the functioning of the Indian commodity market merged with SEBI in the year 2015, SEBI issued a notification that allows brokers having different licenses for commodity and stock exchange to have operations under a single unified license.
The move is likely to deepen the scope of the market and offer more hedging opportunities to companies trade overseas due to liquidity limitations on the domestic exchanges.