Tread cautiously

MFs' entry into commodity derivatives is a risky bet

The proposal by the Securities and Exchange Board of India (Sebi) to allow mutual funds and portfolio managers to invest in commodity derivatives needs to be weighed cautiously before a final decision is taken. This move is part of Sebi’s efforts to open up the commodity derivatives market to institutional participation, domestic and international, in a phased manner, as suggested by the regulator’s commodity derivatives advisory committee. Gold is, at present, the only commodity in which institutional investment has been allowed through exchange-traded funds. Portfolio management service firms were earlier allowed to trade in commodity derivatives, but they were stopped