The Securities and Exchange Board of India (Sebi), on Monday, came out with a new framework for evaluating risk level of commodities — gold and gold- related instruments — in which mutual funds are permitted to invest on risk-o-meter. In a circular, the markets regulator said it has been decided that investment in such commodities by the mutual fund schemes will be assigned a risk score corresponding to the annualized volatility of the price of such commodities.
The annualised volatility will be computed quarterly based on past 15 years' prices of benchmark index of a commodity and risk score for such commodity will be categorized in four levels ranging from ‘moderate’ to ‘very high’, Sebi said in a circular.
Annualised volatility of less than 10 per cent, 10-15 per cent, 15-20 per cent and more than 20 per cent, will have risk score of 3 (moderate), 4 (moderately high), 5 (high) and 6 (very high), respectively.
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