International portfolio investors are permitted to trade in commodities derivatives, the MCX increases by 4%

Sebi has already let institutional investors to participate in exchange-traded commodity derivatives, including Category III alternative investment funds, portfolio management firms, and mutual funds.

After the market regulator Securities and Exchange Board of India (Sebi) permitted foreign portfolio investors (FPIs) to trade in commodity derivatives, shares of Multi Commodity Exchange (MCX) increased by almost 4% on Thursday.

The stock increased by 3.82 percent to a high of Rs. 1,324 on the BSE before losing ground and trading at Rs. 1,291.

“FPIs will be allowed to trade in all non-agricultural commodity derivatives and select non-agricultural benchmark indices. To begin with, FPIs will be allowed only in cash-settled contracts,” Sebi said after a board meeting.

The regulator stated that it is anticipated that FPI participation in Exchange Traded Commodity Derivatives (ETCDs) will increase liquidity and market depth as well as support effective price discovery.

Portfolio management services (PMS), mutual funds, and Category III AIFs have previously been given permission by Sebi to participate in ETCDs.

Analysts now anticipate increased investor participation. According to Tapan Patel, senior analyst (commodities), HDFC Securities, “MCX, being one of the biggest commodities exchanges in the non-agro area, will get direct advantage of the FPI participants.”

Although it has faced selling along with the rest of the market, Dalal Street analysts favour MCX as one of their top financial services stocks. The current price is currently 40% below 52-week highs.

Many others think this might be a chance to purchase the shares at a bargain. The average analyst objective for the stock predicts an increase of 37%, with some of the top projections predicting gains of over 66%.