Commodity volumes crash as CTT comes into play

Non-agri items turnover on top-five commodity exchanges sees 38% fall

Commodity volumes in the top-five exchanges fell over a third on the first day of the week with the imposition of a new tax regime.

The government imposed a tax of 0.01 per cent on commodities from the beginning of the month, a step first mooted in the budget.  This commodity transaction tax (CTT) took a toll on non-agri commodities volumes, as jobbers stayed away, according to market participants.

Jobbers are market players who generate high volumes through multiple buy and sell orders, usually to take advantage of differences in the price of a security across different segments.

The turnover of non-agri commodities of the top-five commodity exchanges witnessed a fall of 38 per cent in the day session of trade.  Multi Commodity Exchange (MCX) turnover volumes have fallen 41.55 per cent to Rs 17,138.77 crore  compared with the average daily turnover of Rs 29,320.13 crore in June.  National Commodity & Derivatives Exchange turnover volumes have fallen 25.99 per cent to Rs 1,486.63 crore today compared with an daily average turnover of Rs 3,306.43 crore in June.

Commodity volumes had last fallen close to 40 per cent on June 21.

When contacted for comment an MCX spokesperson said they had complied with the CTT notification.

An NCDEX spokesperson attributed this fall not only to CTT, but also due to good rainfall in Madhya Pradesh, the largest producer of soy bean. The exchange sees around 35 per cent of its volumes come from oil seed and they have also come under the CTT as the government has classified them as non agri commodities. Dilip Bhatia, CEO of ACE said, “The turnover of commodity exchanges have been impacted due to CTT although we are not present in the metal space as many agri items have been classified as non agri.”

ACE commodity exchange sees 40 per cent of its turnover come from soy oil and the oil seed category has also been classified as non agri by the government.

Bhatia further added that there may be some recovery in volumes later but it won't go up to what it used to be as CTT will have a negative impact on commodity trade on exchanges.