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The levy of commodity transaction tax (CTT) has almost wiped out trading business in non-agri segment on agri centric derivatives exchanges. While weak sentiment pulled down overall business across all exchanges, non-agri segment suffered sharper than agri commodities in terms of turnover in July this year.
The government levied CTT at Rs 10 per lakh if transaction effective July 1. In the first month itself, comexes collected around Rs 80 crore of CTT pushing thereby day-traders behind the commodities’ futures curve. Volumes generated by day-traders in narrowed price movement, therefore, vanished. Such traders, however, enter futures exchange only in case of wide fluctuations in commodity prices.
Consequently, five comexes representing around 99% of futures business recorded an average decline of 33% in July from its preceding month.
India’s largest commodity trading platform, the Multi Commodity Exchange (MCX), however, performed better than other players in the field. Its turnover from agri segment fell a marginally 8.72% at Rs 15747 crore in July compared to Rs 17251 crore in June. But, trading in non-agri segment in which CTT was levied, reported a decline of 35.95% to Rs 760379 crore in July as compared to Rs 1187246 crore in June.
'CTT levy was the sole factor for a decline in exchanges’ turnover in July. While the business in non agri commodities shivered because of CTT, that in agri segment plunged due to the ongoing issues with the National Spot Exchange Ltd (NSEL). All issues be it stocks’ quality and quantity along with ‘payment crisis’ came only in agri commodities which created a panic in this segment. It may have a far reaching impact on agri commodities,' said Sugandha Sachdeva, Incharge (Research), Religare Commodities Ltd.
But, one must appreciate that the open interest remained stagnant on MCX which means long term investors / traders are still confident with the exchange’s ability to overcome any issues pertaining to its group companies, she added.
MCX’s continued with its around 98% market share in non-agri segment. In agri segment, however, the exchange’s share fell from 14.5% in July to 12% in June.
In fact, there was a sharp decline in the turnover in non-agri segment i agri centric exchanges including National Commodity and Derivatives Exchange (NCDEX), National Multi Commodity Exchange (NMCE), Ace Commodity & Derivatives Exchange (Ace) and Indian Commodity Exchange (ICEX).
The turnover of NCDEX shot up by 7.49% to Rs 84208 crore in July from Rs 78343 crore in June. But, its business in non-agri segment which was negligible otherwise also, fell further to just Rs 3 crore in July from Rs 17 crore. Despite repeated efforts, the exchange so far failed to make a dent in non-agri segment.
At a time when all existing players including the leading agri commodity trading platform NCDEX were struggling, Ahmedabad-based NMCE did wonders. With an emphatic 59.67% growth in agri (largely plantations) business, the exchange’s non-agri volume recorded a decline of 96.6%, the sharpest fall in this space, in July. The exchange’s turnover fell to a negligible Rs 527 crore in July from a staggering Rs 15499 crore in June.
'Comexes’ non agri business is difficult to recover going forward given the unfavourable macro-economic conditions. In case of high volatility, however, jobbers may come back,' said Harish Galipelli, Head (commodities), JRG Securities Ltd.
Reliance ADAG controlled ICEX and Kotak anchored Ace also faced a huge slump in their business in July.
