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Commodity futures Trading in India

MUMBAI (Reuters) - Commodity futures trading volumes in India fell 40.49 percent in the year to March 2014, its second straight year of decline, the market regulator said on Tuesday.

In value terms, futures trading at commodity exchanges fell to 101.44 trillion rupees in the first twelve months from April 2013 from 170.46 trillion rupees a year ago, the Forward Markets Commission said in a statement on its website.

Trading in gold bullion fell more than 25 percent to 43 trillion rupees in the year to March 2014, from 78 trillion rupees in the same period last year. Metals volumes fell 46 percent to 17 trillion rupees, and volumes in agricultural commodities fell 25 percent to 16 trillion rupees.

The plunge in volumes and lack of fresh capital is expected to cause at least one national-level exchange, the Indian Commodity Exchange controlled by Reliance Capital (RLCP.NS), to shut down.

The world's second-biggest buyer of gold and second-biggest producer of wheat, India allowed commodities futures trading only in 2003. But enthusiasm has dried up since a scam was unearthed last July at the National Spot Exchange owned by Financial Technologies India, which also owns the largest exchange, the Multi Commodity Exchange (MCEI.NS).

In addition, also last July, India levied a Commodities Transaction Tax (CTT) of 0.01 percent on trade of all non-agricultural commodities futures and a few agricultural commodities futures, and increased restrictions on imports of bullion.

"The very first jolt was that when CTT was introduced and then the NSEL fiasco, " said Haresh Galipelli, vice-president, Inditrade Derivatives and Commodities in Hyderabad.

"We have already seen peaking of retail participation and for the market to reach new level, we need more participation of banks, institutions."

India has 21 commodity bourses, including six operating at the national level, trading about 80 commodities ranging from gold to carbon credits. Foreigners are still not allowed to trade in futures, but can buy stakes in the exchanges.

"Consolidation will continue in commodity trading unless we pass the FCRA (Forward Contract Amendment Bill) and launch innovative products like options, " Galipelli said.

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Popular Q&A

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What is commodity trading in India like?

You would need to be more specific. For example commodity trading in India in 1980's is very different to the trade of 2013. There is information at the local library one can read about the history of India's trading.

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Future of commodity trading in india ?

Right now, commodities are slumping worldwide. It seems to have been set off by the oil price drop. Some people think that the commodities boom is over. That is absolutely false.
India, as well as China, are growing rapidly, and the outlook is for them to continue to grow. Their demand for hard commodities - oil, natural gas, and mining (precious metals and industrial metals) will continue to grow for at least another 5-10 years. The time to buy into this market is now, not when the prices have doubled again.
Best of success.

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