{"id":64761,"date":"2025-09-23T11:25:13","date_gmt":"2025-09-23T05:55:13","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=64761"},"modified":"2025-09-23T11:25:13","modified_gmt":"2025-09-23T05:55:13","slug":"sebi-proposal-may-allow-fpis-to-trade-in-gold-silver-and-base-metals","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/sebi-proposal-may-allow-fpis-to-trade-in-gold-silver-and-base-metals\/","title":{"rendered":"SEBI Proposal May Allow FPIs to Trade in Gold, Silver and Base Metals"},"content":{"rendered":"<h2><b>FPI Commodity Trading Latest News<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">SEBI is reviewing a proposal to let <\/span><strong><a href=\"https:\/\/vajiramandravi.com\/upsc-exam\/foreign-portfolio-investment-fpi\/\" target=\"_blank\">foreign portfolio investors (FPIs)<\/a><\/strong><span style=\"font-weight: 400;\"> trade in non-cash settled, non-agricultural commodity derivatives.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">If approved, FPIs could invest in gold, silver, zinc, and other base metals, expanding investor participation and deepening India\u2019s commodity market.<\/span><\/li>\n<\/ul>\n<h2><b>Commodity Derivatives: An Overview<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Commodity derivatives are financial contracts linked to physical commodities like oil, gold, or wheat.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">They help participants manage price risks or profit from market movements.<\/span><\/li>\n<\/ul>\n<h3><b>How They Work<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Underlying Asset:<\/b><span style=\"font-weight: 400;\"> Value is derived from commodities such as farm produce, energy, or metals.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Financial Contracts:<\/b><span style=\"font-weight: 400;\"> Parties agree on future transactions at fixed prices and quantities.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Price Fluctuation:<\/b><span style=\"font-weight: 400;\"> Contract value changes with commodity price movements.<\/span><\/li>\n<\/ul>\n<h3><b>Purpose and Use<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Hedging:<\/b><span style=\"font-weight: 400;\"> Producers and consumers secure prices to avoid losses from volatility.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Speculation:<\/b><span style=\"font-weight: 400;\"> Traders invest to profit from expected price changes.<\/span><\/li>\n<\/ul>\n<h3><b>Key Types of Contracts<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Futures:<\/b><span style=\"font-weight: 400;\"> Binding contracts to buy\/sell at a fixed price on a future date.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Options:<\/b><span style=\"font-weight: 400;\"> Provide the right, not obligation, to transact at a set price within a period.<\/span><\/li>\n<\/ul>\n<h3><b>Underlying Commodities<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Agricultural:<\/b><span style=\"font-weight: 400;\"> Wheat, corn, cotton, coffee.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Energy:<\/b><span style=\"font-weight: 400;\"> Crude oil, natural gas.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Metals:<\/b><span style=\"font-weight: 400;\"> Gold, silver, copper, aluminum.<\/span><\/li>\n<\/ul>\n<h2><b>SEBI\u2019s Proposal: FPI Entry into Commodity Derivatives<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><strong><a href=\"https:\/\/vajiramandravi.com\/upsc-exam\/securities-and-exchange-board-of-india-sebi\/\" target=\"_blank\">SEBI<\/a><\/strong><span style=\"font-weight: 400;\"> is reviewing a proposal to allow foreign portfolio investors (FPIs) to trade in non-cash settled, non-agricultural commodity derivatives, including metals.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">While a committee is already working on strengthening the agricultural commodities segment, a separate group will be set up to develop the non-agricultural space.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The move follows SEBI\u2019s recent approval of a single automatic window for foreign investors, even as FPIs have offloaded over \u20b960,000 crore in equities since July 2025.<\/span><\/li>\n<\/ul>\n<h2><b>Current Commodity Trading Rules for Foreign Investors<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">In India, commodities traded on exchanges are divided into <\/span><b>hard commodities<\/b><span style=\"font-weight: 400;\"> (metals and energy) and <\/span><b>soft commodities<\/b><span style=\"font-weight: 400;\"> (agricultural and processed products).\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Presently, foreign investors are allowed to trade only in <\/span><b>cash-settled non-agricultural contracts<\/b><span style=\"font-weight: 400;\">, such as natural gas, crude oil, and index-based futures and options.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">However, they are <\/span><b>barred from trading in ferrous metals, base metals, and precious metals<\/b><span style=\"font-weight: 400;\"> under current regulations.<\/span><\/li>\n<\/ul>\n<h3><b>Expanded Trading Access for FPIs<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">With the proposed regulatory changes, FPIs will be allowed to trade in <\/span><b>physically settled non-agricultural commodities<\/b><span style=\"font-weight: 400;\"> such as gold, silver, zinc, and lead.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This expansion, covering base and ferrous metals along with precious metals, will give FPIs access to markets where India is a significant global player.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Experts suggest this move will enhance capital efficiency and provide investors with broader opportunities, especially in commodities like gold and silver.<\/span><\/li>\n<\/ul>\n<h2><b>Why SEBI Wants FPIs in Non-Cash Commodities<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Allowing FPIs in non-cash, non-agricultural commodities aims to <\/span><b>deepen India\u2019s commodity markets and improve price discovery<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">With their financial strength and research capabilities, FPIs can boost <\/span><b>liquidity<\/b><span style=\"font-weight: 400;\">, especially in longer-duration contracts where trading is currently weak.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This would help industrial users hedge more effectively and reduce costs from monthly rollovers.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Greater participation could also encourage Indian corporates to hedge domestically instead of relying on international exchanges.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">SEBI\u2019s push reflects the need for stronger, more liquid markets amid global geopolitical uncertainties.<\/span><\/li>\n<\/ul>\n<p><b>Source:<\/b> <strong><a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/modi-new-gst-rates-lower-prices-household-impact-10263029\/?ref=infinite\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a> | <a href=\"https:\/\/www.business-standard.com\/markets\/news\/sebi-mulls-fresh-reforms-for-commodity-derivatives-125091700888_1.html\" target=\"_blank\" rel=\"nofollow noopener\">BS<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>SEBI may permit foreign portfolio investors (FPIs) to trade in gold, silver, zinc, and other metals, aiming to deepen India\u2019s commodity market and boost liquidity.<\/p>\n","protected":false},"author":18,"featured_media":64784,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[2842,60,22,59],"class_list":{"0":"post-64761","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-fpi-commodity-trading","9":"tag-mains-articles","10":"tag-upsc-current-affairs","11":"tag-upsc-mains-current-affairs","12":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/64761","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=64761"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/64761\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/64784"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=64761"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=64761"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=64761"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}