Sebi provides clarity on Mutual Fund’s gross exposure on exchange traded commodity derivatives

By: |
January 15, 2021 10:10 PM

Markets regulator Sebi on Friday provided clarity on cumulative gross exposure taken by mutual funds on exchange-traded commodity derivatives (ETCDs).

SebiSEBI is the capital markets regulator in India. File image/Agencies

Markets regulator Sebi on Friday provided clarity on cumulative gross exposure taken by mutual funds on exchange-traded commodity derivatives (ETCDs). The regulator in May 2019 permitted mutual funds to participate in ETCDs. In a circular on Friday, Sebi said that the short positions that are not exceeding the holding value of underlying goods received in physical settlement contracts would not be considered in the cumulative gross exposure taken by mutual funds on ETCDs.

It added that short positions not exceeding the long position on the same goods will also not be considered. It further said mutual funds would not write options, or purchase instruments with embedded written options in goods or on commodity future.

“The point on exclusion of short position in ETCDs from the cumulative gross exposure can help multi-asset funds operationally,” said MyWealthGrowth.com co-founder Harshad Chetanwala. He added that earlier, the cumulative gross exposure across equity, debt and derivatives positions (including commodity derivatives) were not allowed to exceed over 100 per cent of net asset value (NAV).

Mutual funds taking derivative short as well as long positions on the same commodity would not be counted twice in the gross exposure limits as mentioned by Sebi in its earlier circulars, said Green Portfolio co-founder Divam Sharma. He added that the regulator’s move would give relief to the hybrid mutual fund schemes as they will now be able to take additional long exposures considering the clarity on gross exposure limits. They can also maintain hedge on their long positions to ensure capital protection and better returns.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Govt buys wheat worth Rs 85,581 cr, paddy worth Rs 1.64 lakh cr this marketing year so far
2Sebi comes out with framework on processing of scheme related applications by AMCs
3RIL Q1 results LIVE: Reliance Retail net profit more than doubles on-yr; Jio net grows 45%