Sebi could be looking how such arrangements operated abroad, particularly the United States. Mehta was replying to a specific question whether Sebi was considering to allow mutual funds to invest in the commodities futures exchange. Mutual fund behemoth UTI has reportedly shown an interest in investing in the commodities forward market, particularly in the domestic coffee futures exchange. UTI had heldpreliminary talks with Coffee Futures Exchange of India (Cofei) a couple of months ago. However, Coefi president Ashwin Shah said UTI was yet to get back to the exchange after the initial discussion.

The commodity forward trade is of the view that allowing mutual funds to take part in futures trading will bring in the much-needed liquidity to the market. Such participation would also help futures trading stabilise in the country. According to Shah, mutual funds are investing in coffee futures exchange abroad. ``Coffee is the second-largest traded commodity in the world and allowing mutual funds to take part in the country's futures exchange will go a long way,'' he said. Mehta said Sebi would definitely look into these aspects if any concrete proposals were made. However, some of the mutual funds are not yet ready to invest in commodities market.

``We would like the commodities markets to stabilise and become a reliable trading instrument," a top official of one of state-owned mutual funds said.Commodities trading is yet to gain acceptance in the country and until that time investors will continue to be wary of such investments, the official, who did not wish to be identified, said. Moreover, some of the mutual exchanges did not have enough funds to invest in commodities futures, he said.