MFs, PMS in commodities: Opportunities galore, with near-term challenges

Fund houses and portfolio management service providers are optimistic about their proposed entry in the commodity derivatives market, but they also point out some teething challenges in initial days

The proposed entry of mutual funds and portfolio management service (PMS) providers in the commodity derivatives segment is set to provide a big boost to the derivative market through increased hedging, especially for producers, besides improving depth and liquidity in far-month contracts as well.

Fund houses, PMS managers and experts are optimistic about the opportunities to be thrown open by the proposed move. However, they concede that there are several milestones to be crossed and challenges to be met before the full potential of this market is realised.

The market regulator, Securities and Exchange Board of India (Sebi), is expected to soon