FMC for MFs, FIIs entry into commodities

The commodities market regulator, Forward Markets Commission (FMC), is in favour of allowing mutual funds (MFs) and foreign institutional investors (FIIs) to take part in national commodities exchanges. FMC will forward its recommendations to the government.

"To begin with, FIIs and MFs can invest in bullion (gold and silver) and crude oil as these are global commodities and, importantly, these entities are active players in these commodities globally. Gradually, other commodities would also be opened for them in phased manner," FMC Chairman S Sundereshan said.

FMC would decide on participation of MFs and FIIs in agri commodities at a later stage considering other aspects such as availability, delivery and market sentiments. FMC treats MFs and FIIs on par with individual investors and, hence, there would be no change in limits especially for them.

"We have recommended to the Securities and Exchange Board of India (Sebi) to make necessary amendments to the Sebi Act (Section 15 and 43) to allow FIIs and MFs to trade in commodities futures in national exchanges," Sundereshan said.

"We are not only looking at volume growth but price discovery," he added.

"This is a welcome decision by the FMC. Now, small investors can enter bullion trade even with small investment," an analyst said.