Financial Daily from THE HINDU group of publications
Wednesday, Dec 14, 2005
Financial Daily from THE HINDU group of publications Wednesday, Dec 14, 2005 |
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Mutual Funds Markets - Foreign Institutional Investors Agri-Biz & Commodities - Commodity Exchanges MFs, FIIs can now participate in gold, silver & crude futures — Decision on other commodities to be taken gradually Our Bureau
Mumbai , Dec. 13 THE Forward Markets Commission (FMC) has announced that mutual funds and foreign institutional investors would be allowed to participate in bullion and crude oil futures at the national commodity exchanges. "We would like to open up commodity futures to mutual funds and FIIs in a phased manner, in commodities that are internationally traded and in which many foreign investors are active," Mr S. Sundareshan, Chairman, FMC, said at a news conference in Mumbai on Tuesday. "A decision on allowing MF and FII participation in other commodities, particularly agri commodities, would be taken gradually as there are sensitivities involved," he said. FMC has recommended that the Securities and Exchange Board of India make the necessary amendments to allow MFs and FIIs to trade in these commodities, he said. SEBI is required to make amendments to the provision of the SEBI Act, numbers 15 and 43, to allow FIIs and MFs to trade in commodity futures. The committee set up by FMC to study the entry of these entities into commodity futures had earlier recommended their participation. However, the FMC, which met on Tuesday, decided to limit their participation to three commodities — gold, silver and crude oil. Small investor interests: "Our decision to allow MFs to trade in commodity futures is to allow the small investor a chance to enter this arena. Besides, the participation of MFs and FIIs will lend depth to the trade," Mr Sundareshan said. "This decision is very good because MFs can now provide an opportunity to common investors to enter into commodity trade," Mr A. P. Kurien, Chairman, Association of Mutual Fund in India, said. "It is now for SEBI to consider the amendments," he said. MFs will have to work out the details about the structure of products they can offer to investors. Price setting: Mr Sundareshan said that allowing MFs and FIIs to participate in bullion futures would help India become a price setter in the global market as the country is the world's largest consumer of gold. FMC will also urge the Government to allow participation of banks in commodity futures, he said. The Reserve Bank of India had earlier announced that banks should be allowed to participate in commodity derivatives to develop the commodity futures market. However, the RBI is the authority to decide on the nature of exposure of banks to commodity futures trading, said Mr Sundareshan. Regulations: FMC, he said, would draw up guidelines to regulate these players once the SEBI amendments are in place. Regulations for MFs and FIIs will be the same as those for existing players in these national commodity exchanges.
Related Stories: More Stories on : Mutual Funds | Foreign Institutional Investors | Commodity Exchanges
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