The risk factor

Cautious stand needed on commodity derivatives

The Securities and Exchange Board of India (Sebi) will be well-advised to revisit its plan to allow mutual funds and portfolio managers to deal in commodity derivatives following the misgivings expressed by the finance ministry about this move. The Sebi board had approved the move to offer investors additional tools to hedge against inflation and facilitate efficient price discovery in a transparent manner. However, the economic affairs department of the finance ministry thinks otherwise. It is wary of opening up the commodities market to institutions that have no direct exposure to underlying commodities. The danger is that this could lead