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Informist, Wednesday, Aug. 12, 2026

 

MUMBAI – The commodity market in India is facing several challenges, such as low liquidity in derivatives other than bullion, holding-period restrictions, and the 30?p in strategic investment funds, experts said. Raising the investment limit for strategic investment funds, allowing a dedicated gold and silver investment fund, or giving investors access to overseas commodity derivatives could be some of the solutions, they said in a panel discussion at the Global Commodity Conclave here Wednesday.

 

Currently, strategic investment funds' exposure to unlisted securities is capped at 30% of the assets under management, and raising this limit could allow mutual funds to increase their exposure to commodities, Anand Vardarajan, chief executive officer and managing director of Tata Asset Management, said. "... it was prudent at that point in time to really look at 30% risk for starters. Now that we have spent quite a few years in that, maybe I would urge that limit can perhaps start looking up a bit... 10?p on individual commodities, again something which can be revisited," Vardarajan said, adding that the 180-day holding period for physical gold and silver can also be revisited.

 

Strategic investment funds are a great vehicle, and a lot of innovation can happen in this space, said Vikram Dhawan, fund manager, commodities at Nippon Life India Asset Management Ltd. Dhawan added that Indian investors should be allowed to access overseas commodity derivatives as liquidity can be low in domestic markets. "It is ring-fencing it away from the mutual fund and I think a lot of innovation may happen in that... would like to see funds where commodity take the center stage and equity and debt for a change are the tail of that funds," he said. Dhawan added that it is a "no brainer" that we need to build our commodity market, saying there is no dedicated vertical for commodities in the Securities and Exchange Board of India and the industry operates as a sub-committee.

 

There are currently very few participants in India's commodity markets and a broader investor base is needed, which can happen through mutual funds, Kishore Narne, executive director at Motilal Oswal Financial Services Ltd., said. "... this will keep growing, the existing commodities speculative trading community will keep expanding, but the masses will come through the mutual funds or the managed money," he said.

 

"I would wish, you know, we do have index ETFs (exchange-traded funds) allowed, but an index fund based on gold and silver will definitely make life easier for a lot of retail investors because it offers a lot of convenience compared to ETFs," one of the panellists said. These experts recommended allocating around 15-20% of an investor's portfolio to commodities.  End

 

Reported by Ashutosh Pati and Kabir Sharma

Edited by Saji George Titus

 

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