India could start allowing institutional investors to trade in its annual $1 trillion commodity futures market as soon as in a month. The government targets deepening of the market. India has allowed futures trading in commodities since 2003 but has so far kept out foreign investors, banks, mutual funds and other institutions. The move to open up to institutional investors will give large companies hedging opportunities and help in integrating the spot and futures markets. Mutual funds are likely to be the first to get access to the commodity futures market, may be in a month, Sinha said.

In the last few years commodity futures markets have stopped growing. This step will boost commodities trade and restore confidence of retail investors. For better price realization you have to have a mix of all the participators in the market apart from speculators. Goldman Sachs Investments (Mauritius), Blackstone GPV Capital, Matthews Asia Growth Fund and Inter Continental Exchange (ICE) are among foreign investors that hold stakes in Indian commodity exchanges. With the entry of institutional investors liquidity will rise. SEBI is also planning to allow options trading in commodities.