Intense competition and lifting of trading ban on four agri products will help the commodity futures exchanges end 2009 with a record turnover of up to Rs 70,00,000 crore, up 39 per cent from last year.
The total turnover was at Rs 50,33,872 crore in 2008.
“I expect the commodity futures market to grow to Rs 67,00,000-70,00,000 crore by 2009-end,” Forward Markets Commission (FMC) Chairman B C Khatua said.
The year started on a good note, thanks to lifting of ban on futures trading in chana, soya oil, potato and rubber towards 2008-end. Fueling competition in the seven-year old market, Indiabulls launched the Indian Commodity Exchange (ICEX) in partnership with state-run MMTC, while Kotak Group got permission to set up a national commodity exchange in association with the Ahmedabad Commodity Exchange (ACE).
By the end of November, the combined turnover of the four national and 19 regional commodity exchanges stood at Rs 62.94 lakh crore, which the sector regulator FMC expects to cross Rs 67 lakh crore by December-end.
The monthly turnover of the commodity exchanges improved during the year driven by demand for agricultural commodities amid fears of a production slump under the twin impact of floods and drought.
“The growth has been more balanced this year and has been driven mainly by agri-items,” Khatua said. The country’s largest commodity bourse Multi Commodity Exchange (MCX) saw its turnover grow 36 per cent to Rs 53.37 lakh crore, while that of the leading agri-commodity bourse National Commodities and Derivatives Exchange (NCDEX) improved 17.22 per cent to Rs 701,553 crore during January-November 2009. Ahmedabad-based National Multi-Commodity Exchange of India’s (NMCE’s) turnover increased to Rs 1,70,419 crore from Rs 32,057 crore in the review period.
But, no sooner confidence in the farm items rebounded, the government suspended trading in sugar in May for seven months until December-end to arrest further rise in prices.
The Ordinance amending the Forward Contract (Regulation) Act (FCRA), which would have given more power to the FMC, lapsed in the second week of April as the government could not pass a Bill within the prescribed time. Had the FCRA Bill been passed, the market would have grown much higher with the launch of new products like options, an analyst with commodity-brokerage firm Karvy Comtrade said.
The entry of ICEX also triggered intense competition in the market as the new exchange fixed transaction fee at Re 1 for turnover of Rs 1,00,000, unlike the other three national commodity exchanges — MCX, NCDEX and NMCE — which charge Rs 1-4 depending on daily turnover slabs. In addition to record turnover, year 2009 will also be remembered by the commodity broking community for tightening of cash transaction norms by the FMC. The sector regulator brought brokers too, through exchanges, under the Prevention of Money Laundering Act (PMLA) in November. According to the PMLA guidelines, commodity brokers will have to verify identity of clients, maintain certain records and disclose details of all cash transactions over Rs 10 lakh or its equivalent in foreign currency, to the designated authority as is being done by stock brokers under the law.