The Hindu Business Line : Ban only on fund-based portfolio management services: FMC

Commodity market regulator Forward Market Commission (FMC) has clarified that it has banned only fund-based portfolio management services (PMS) in commodity markets and not advisory services.

In a circular sent to the commodity exchanges, FMC has said: "Research-based technical analysis, daily news letters indicating price trends, predictions and recommendations, commodity-specific news and analysis are not covered under advisory services and can be undertaken. Transactions resulting in fund-based portfolio management services are not permitted".

The regulator will be soon issuing detailed guidelines on fund-based portfolio management services in commodities. At present, portfolio management services are allowed only in the securities market governed by the Securities and Exchange Board of India.

"It is not yet clear whether FMC will adopt the SEBI guidelines on portfolio management services with minor changes or set completely new norms," said Mr P.H. Ravikumar, Managing Director, NCDEX.

Apart from issuing advices on commodity investments, many small broking firms have been carrying out fund-based investment services assuring minimum returns. The rise in commodity prices has come in handy for broking firms to lure investors with little prior knowledge of commodity trading through fund-based PMS.

Investment services

Officials from broking firms have met the regulator seeking clarity on the blanket ban on advisory services. FMC has been tightening the screws on commodity futures trading, which of late has turned volatile.

Commodity traders and many broking firms have welcomed the regulator's stand on advisory services. "The clarification has come at the right time. The nascent commodity market needs checks and balances to keep trades orderly. Allowing research-based recommendations will help small retail investors take correct decisions," said Mr Sushil Sinha, Regional Head, Karvy Commodities.

The prices of many essential commodities, such as potato, pulses, spices and chilli, have hit historic highs on speculation. FMC has cut open interest positions and imposed additional margins to hold back speculators.

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Ban only on fund-based portfolio management services: FMC