Reportedly Mutual fund houses so far were not permitted to invest in commodities other than gold. At most, a few fund houses had thematic funds investing in the equity of companies engaged in the commodities business. But that is set to change with SEBI issuing final guidelines on May 21, 2019, permitting MFs to invest in exchange-traded commodity derivatives, with an aim to deepen the nascent commodity market.
But while the capital market regulator SEBI is gung-ho about fund houses investing in commodity derivatives, mutual fund managers sounded skeptical. As per the guidelines released on May 21, SEBI has permitted mutual funds to participate in all exchange-traded commodities derivatives (ETCDs) except the 'sensitive commodities'. Essential commodities in the agri segment are regarded as sensitive.
Hybrid funds and gold exchange-traded funds have been permitted to participate in ETCDs. The market regulator said in a circular "No mutual fund scheme shall have net short positions in ETCD on any particular good, considering its positions in physical goods as well as ETCDs, at any point of time”.
