Sebi allows foreigners to invest in commodities

Deccan Chronicle.

Business, Market

Participation of EFEs to make market more efficient, says Sebi.

This according to market participants is to curb any excessive speculation in the futures trading.

Mumbai: Sebi approved the regulatory framework for permitting foreign entities having exposure to Indian commodity markets to participate in the domestic commodity derivatives markets. Such entities would be classified as eligible foreign entities (EFEs) and should have a minimum net worth requirement of $5,00,000.

The move, according to experts, would help in attracting fresh foreign capital at a time when the rupee is witnessing persistent weakness amidst a sell-off in emerging market risk assets.  

To start with, EFEs would be allowed to trade in all commodity derivatives traded on Indian exchanges except those contracts having underlying commodity defined as ‘sensitive commodity’. Additionally, the tenor of their hedge positions would not be allowed to be greater than the tenor of the underlying exposure.

This according to market participants is to curb any excessive speculation in the futures trading.

Sebi believes that the participation by EFEs could make the commodity derivative markets more liquid and efficient. It may also add to the depth  and  liquidity  in  the  far month contracts. More liquidity in commodity derivatives exchanges may attract more domestic firms to trade on Indian exchanges over a period of time.

Commission charges for Mutual funds lowered

The Sebi has lowered the commission charged by mutual fund distributors saying that the economies of scale should also benefit small investors.

The assets under  management  (AUM)  of  the mutual fund industry  in  India  has  grown manifold over the years. As on August 31, the AUM has crossed  `25 lakh crore.  “While the AUM has grown multiple times, the benefit of economies of scale has not been fully shared with the investors,” said Ajay Tyagi, chairman Sebi. Under the revised guidelines, the average total expense ratio charged by mutual fund distributors would come down to the range of 1.05 per cent – 2.25 per cent from 1.75 per cent – 2.50 per cent.

According to experts, the investors are likely to save around Rs 1,300 to `1,500 crore.  Sebi added that the additional expenses permitted for penetration in beyond 30 cities should be based on inflows from retail investors.