Sebi permits FPIs to deal in exchange-traded commodity derivatives

Indian regulators have been cautious in allowing FPIs in the commodities market on fears that sudden outflows by them may disrupt the market

The Securities and Exchange Board of India's (Sebi's) board on Wednesday allowed foreign portfolio investors (FPIs) to trade in exchange-traded commodity derivatives. The move, it said, “will enhance liquidity and market depth, as well as promote efficient price discovery.”

Overseas investors will only be allowed to deal in non-agricultural commodity derivatives and only cash-settled contracts. The three broad non-agri commodities where derivatives contracts are available on domestic bourses are bullion, energy, and base metals. 

The more sensitive agricultural commodities have been kept out of bounds to avoid unnecessary volatility in them. Further, limits on outstanding positions FPIs will be allowed to hold