Traders work on the trading floor of the Multi Commodity Exchange of India in Mumbai, India (Photographer: Amit Bhargava/Bloomberg News)

Allowing Foreign Investors Can Help India Set Global Commodity Prices, Says MCX’s Mrugank Paranjape

Allowing foreign investors to participate in the commodity derivatives markets with a long-term perspective will help India become a price-setter in commodities.

That’s the word from Multi Commodity Exchange’s Managing Director and Chief Executive Officer Mrugank Paranjape, after the markets regulator—SEBI—yesterday allowed foreign investors to participate in the commodity derivatives markets

“Allowing overseas investors to participate in the commodity derivatives market is a positive move,” Paranjape told BloombergQuint in an interaction. “Foreign entities who have an exposure to Indian commodities will now be able to hedge those exposures on the Indian exchanges.”

At present, only Indian corporates and category III of Alternative Investment Funds were allowed to trade, Paranjape said, adding that MCX is awaiting SEBI’s approval to enable participation of mutual funds and portfolio management services.

The Securities and Exchange Board of India’s Chairman Ajay Tyagi liberalised commodity derivatives markets by allowing eligible overseas investors to participate in all commodity derivatives traded on Indian exchanges, barring those classified as sensitive. The minimum net worth required for an eligible foreign entity was set at $500,000.

Paranjape expects the new norms to come into effect in the next few months.