Indian Commodity Derivatives Markets:Some Measures for the Future

The Government of India is contemplating allowing the Institutional investors like Foreign Institutional Investors, Mutual funds and Banks to trade in a few selected products of commodity derivatives markets in India. This paper argues that if the institutional investors are allowed to operate in all the products of the commodity derivative markets, it has implications for both liquidity and broad basing of commodity derivatives markets given the assets under management of these investors. Their entry into commodity derivatives markets is also expected to benefit them given the portfolio diversification opportunities. This paper discusses some aspects of the gains that the commodity derivatives markets can derive if institutional investors are allowed to operate.