India eases foreign investor access to commodity derivatives, expands scope of portfolio managers

MUMBAI: India on Thursday allowed foreign investors to trade in physically settled contracts, giving them greater access to non-farm commodity contracts as the country looks to increase liquidity and better align the market with global counterparts.

Markets regulator Securities and Exchange Board of India also allowed portfolio managers based in the country to manage global assets, complementing the government’s drive to attract overseas fund management activity.

Under the new rules, portfolio managers can also invest in global and to-be-listed securities, in line with allowances for mutual funds and alternative investment funds.

Overseas investors currently cannot participate in contracts linked to crude oil, natural ​gas, gold or silver if they are settled by actual ⁠delivery of the underlying goods, largely due to operational constraints.

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SEBI said it has approved foreign investors to square-off or roll-over positions at least three days before contract expiry. Any positions ​left open would be automatically transferred to designated ​trading members, ⁠preventing overseas investors from entering the delivery process.

The move is expected to boost bullion trading volumes by facilitating foreign investor participation and aligning India with other major markets.

Since foreign investors were allowed into cash-settled commodity derivatives in 2022, liquidity in crude oil and natural gas options has risen significantly. They accounted for a growing share of open interest, regulatory data showed.

For India’s commodities exchange, MCX, energy contracts remain one of the exchange’s key growth engines with energy derivatives turnover rising 29% in fiscal ending March 2026.