India's hedge funds will not be able to participate in foreign exchange and commodities-derivatives markets as a precondition for being approved by the Securities and Exchange Board of India. SEBI's policy is intended to stabilize currency markets by reducing speculation. "Allowing domestic hedge funds to participate in the currency derivatives market could add more volatility to the currency market and harm the rupee's stability," said Russell Gaitonde, partner of law firm BMR Advisors.

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