MFs' initial response to new commodity derivatives norms likely to be muted

Long-term liquidity may not improve in current framework

Sebi’s new norms allowing mutual funds to participate in the commodity derivatives segment will not help improve medium- to long-term liquidity in the market. In commodity futures, only current and, to an extent, next month contracts have liquidity and that too just a handful of them.

Commodity market or exchanges are still waiting to see real liquidity and depth in the market, which institutional investors like Mutual Funds can provide. However, several riders enforced due to the finance ministry's over-cautious approach seem to be straining the market.

After Sebi approved regulations for MFs' participation in commodity derivatives, the finance ministry