Allowing MFs To Participate In Commodity Derivatives: A Good Move!

Mutual funds now have another category of asset to invest in. The recent circular by market regulator, SEBI, has allowed the mutual fund schemes to invest in commodity derivatives through ETCDs (Exchange Traded Commodity Derivatives). 

Nonetheless, not all MF categories are allowed to invest in ETCD. Hybrid funds and gold ETFs are two categories that are permitted to participate in ETCDs, that too only in non-sensitive commodities. Although, as a concept, it seems to be a good move as commodities have low correlation with the equity and debt markets, which means the commodities do not move in tandem with the latter. Therefore, this is a perfect tool for diversification. However, the categories through which they are allowed to participate in these instruments form a minuscule part of the total MF assets under management. Therefore, it will not have much impact on the mutual fund investors. The actual beneficiary of this move will be the commodity market, where the participation of the institutional investors such as MFs will provide the necessary depth to the market.

Our cover story this time dives deep to understand where we are in terms of market cycle. Also, it explains which categories of funds, both sector-wise as well as market cap-wise, are likely to be the winners at this stage of the market. It further studies if higher beta funds can be a good investment bet.

Besides, we have also done a special report on whether an actively managed large-cap fund or passively managed index fund or exchange traded fund (ETF) is better for you. This story will help you to appropriately manage your large-cap exposure to your overall asset allocation plan.

Hope our stories will help you to take wise investment decision. We will be more than happy to receive your feedback and suggestions on our stories.