After a long wait, Sebi notifies rules for MFs to enter commodity space

Fund houses have been barred from being net sellers or holding net short positions at the scheme level in commodities

Market regulator Sebi has permitted mutual funds to participate in all exchange-traded commodities except the ‘Sensitive Commodities’. Essential commodities in the agri segment are regarded as sensitive. Along with MFs, gold exchange-traded funds also have been allowed to participate, but only in gold derivatives.

After a year-long debate, the Securities and Exchange Board of India has finally issued a circular allowing funds to enter the commodity derivatives space. However, they have been barred from taking physical delivery.

Even if they have to take physical deliveries as a part of settlement, they will have to dispose the goods within 30 days