Current Scenario in Indian Commodity Market
Need of Commodity Derivatives for India
India is among top 5 producers of most of the Commodities, in addition to being a major consumer of bullion and energy products.
Agriculture contributes about 22% GDP of Indian economy. It employees around 57% of the labor force on total of 163 million hectors of land Agriculture sector is an important factor in achieving a GDP growth of 8-10%. All this indicates that India can be promoted as a major centre for trading of commodity derivatives.
Trends in volume contribution on the three National Exchanges:-
Pattern on Multi Commodity Exchange (MCX)
MCX is currently largest commodity exchange in the country in terms of trade volumes, further it has even become the third largest in bullion and second largest in silver future trading in the world.
Coming to trade pattern, though there are about 100 commodities traded on MCX, only 3 or 4 commodities contribute for more than 80 percent of total trade volume. As per recent data the largely traded commodities are Gold, Silver, Energy and base Metals.
Incidentally the futures’ trends of these commodities are mainly driven by international futures prices rather than the changes in domestic demand-supply and hence, the price signals largely reflect international scenario.
Among Agricultural commodities major volume contributors include Gur, Urad, Mentha Oil etc. Whose market sizes are considerably small making then vulnerable to manipulations.
Pattern on National Commodity & Derivatives Exchange (NCDEX)
NCDEX is the second largest commodity exchange in the country after MCX. However the major volume contributors on NCDEX are agricultural commodities.
But, most of them have common inherent problem of small market size, which is making them vulnerable to market manipulations and over speculation. About 60 percent trade on NCDEX comes from guar seed, chana and Urad (narrow commodities as specified by FMC).
Pattern on National Multi Commodity Exchange (NMCE)
NMCE is third national level futures exchange that has been largely trading in Agricultural Commodities.
Trade on NMCE had considerable proportion of commodities with big market size as jute rubber etc. But, in subsequent period, the pattern has changed and slowly moved towards commodities with small market size or narrow commodities.
Analysis of volume contributions on three major national commodity exchanges reveled the following pattern, Major volume contributors: -
Majority of trade has been concentrated in few commodities that are
• Non Agricultural Commodities (bullion, metals and energy)
• Agricultural commodities with small market size (or narrow commodities) like guar, Urad, Mentha etc.
Need of Commodity Derivatives for India
India is among top 5 producers of most of the Commodities, in addition to being a major consumer of bullion and energy products.
Agriculture contributes about 22% GDP of Indian economy. It employees around 57% of the labor force on total of 163 million hectors of land Agriculture sector is an important factor in achieving a GDP growth of 8-10%. All this indicates that India can be promoted as a major centre for trading of commodity derivatives.
Trends in volume contribution on the three National Exchanges:-
Pattern on Multi Commodity Exchange (MCX)
MCX is currently largest commodity exchange in the country in terms of trade volumes, further it has even become the third largest in bullion and second largest in silver future trading in the world.
Coming to trade pattern, though there are about 100 commodities traded on MCX, only 3 or 4 commodities contribute for more than 80 percent of total trade volume. As per recent data the largely traded commodities are Gold, Silver, Energy and base Metals.
Incidentally the futures’ trends of these commodities are mainly driven by international futures prices rather than the changes in domestic demand-supply and hence, the price signals largely reflect international scenario.
Among Agricultural commodities major volume contributors include Gur, Urad, Mentha Oil etc. Whose market sizes are considerably small making then vulnerable to manipulations.
Pattern on National Commodity & Derivatives Exchange (NCDEX)
NCDEX is the second largest commodity exchange in the country after MCX. However the major volume contributors on NCDEX are agricultural commodities.
But, most of them have common inherent problem of small market size, which is making them vulnerable to market manipulations and over speculation. About 60 percent trade on NCDEX comes from guar seed, chana and Urad (narrow commodities as specified by FMC).
Pattern on National Multi Commodity Exchange (NMCE)
NMCE is third national level futures exchange that has been largely trading in Agricultural Commodities.
Trade on NMCE had considerable proportion of commodities with big market size as jute rubber etc. But, in subsequent period, the pattern has changed and slowly moved towards commodities with small market size or narrow commodities.
Analysis of volume contributions on three major national commodity exchanges reveled the following pattern, Major volume contributors: -
Majority of trade has been concentrated in few commodities that are
• Non Agricultural Commodities (bullion, metals and energy)
• Agricultural commodities with small market size (or narrow commodities) like guar, Urad, Mentha etc.