The Securities and Exchange Board of India (SEBI) said on Friday it would allow mutual funds and portfolio managers to trade in commodity derivatives, in a move to boost trade and deepen the market.
SEBI has been opening up the commodity derivatives market to institutional investors to give large companies an opportunity to hedge and help integrate the spot and futures markets.
SEBI allowed hedge funds to invest in commodity derivatives in mid-2017 and in late 2018 permitted certain foreign entities with exposure to commodity markets. Banks, however, are still not allowed to trade in the market.
The move on Friday is a positive and significant step from the regulator, said Mrugank Paranjape, managing director of Multi Commodity Exchange Of India Ltd.
"Institutional participation will play an important role in adding liquidity and depth to the commodity derivatives market, leading to enhanced efficiency in price discovery and risk management," Paranjape added.
SEBI on Friday also approved amendments to real estate investment trust (REIT) and infrastructure investment trust (InvIT) rules to provide flexibility on fund raising and to make the investment vehicles attractive to investors.
The regulator raised the leverage limit for InvITs to 70 per cent from 49 per cent.
Allotment by REITs and InvITs shall be made in multiples of a lot, the value of which would be 1,00,000 rupees ($1,411.27) for InvITs, and 50,000 rupees for REITs, SEBI added.
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