SEBI may open up commodities market to FIIs, mutual funds, PMS by March

Capital and commodities market regulator, SEBI is planning to open up the commodities market for foreign portfolio investors (FPIs), fund houses and portfolio management services (PMS) by March, sources told Moneycontrol.

Recently, Securities and Exchange Board of India had approved the concept of a universal exchange, wherein a bourse can offer both equity and commodity trading under the same roof. This will be implemented from October this year.

The regulator is fast-tracking the process of allowing FPIs in the commodities market. However, it may allow only those FPIs which already have an exposure to Indian financial markets.

Moneycontrol had earlier reported that foreign investors will soon be allowed to trade in commodities market.

The move may help companies with a global presence to hedge their positions.

A source close to development told Moneycontrol: “Once universal exchange is implemented fully, we will talk to RBI about allowing corporates to hedge a small portion of their global commodity exposure in the domestic market”

Mutual fund houses are also expected be allowed to trade in commodities by March this year. Industry bodyAssociation of Mutual Fund in India (AMFI) has already submitted its recommendations to SEBI.

“SEBI is ready to allow mutual funds in the commodity market soon. AMFI needs clarity on the underlying product quality since warehouses are not purely regulated by SEBI. AMFI wants more products in the segment of non-agri and agri commodities,” the source said.

Currently, MFs are running gold exchange-traded funds, and they invest in commodity-related companies also.

“SEBI’s target to allow PMS in commodities market is March. PMS and Mutual Funds should be allowed to trade in physical commodities. Custodian will ensure one leg will come from derivatives,” said another source.

SEBI had issued consultation paper for allowing mutual fund and portfolio management services firms in commodity market in December last year. SEBI wants to deepen the commodities market in India by allowing a variety of investor categories to participate .