Business | Markets
Metals and energy lift Indian commodity exchanges
Surging trade in metals and energy has propped up Indian commodity exchanges despite a ban on farm futures, and volumes are set to grow even more as investors scramble for safe haven assets amid weakening financial markets.
- Reuters
- Published: 23:23 August 5, 2008
Mumbai: Surging trade in metals and energy has propped up Indian commodity exchanges despite a ban on farm futures, and volumes are set to grow even more as investors scramble for safe haven assets amid weakening financial markets.
But analysts warn that not all will benefit equally.
Buoyed by a rapid-fire approach to new contracts, sector leader the Multi Commodity Exchange (MCX) - valued at $1.1 billion when Citigroup and Merrill Lynch each bought five per cent stakes in it last year - is taking market share.
The runner-up National Commodity & Derivatives Exchange Ltd (NCDEX), in which Goldman Sachs and IntercontinentalExchange hold minority stakes, has watched its fortunes wither this year.
The exchange, which focused on agricultural commodities, saw trading volumes fall by a third after the government banned contracts for eight commodities, including its heavily traded wheat, soyoil and chick pea contracts.
New contracts
Now NCDEX is set to begin quickly developing new contracts, a strategy that has helped the MCX weather setbacks like the ban on trade in agricultural products like wheat and rice, a proposed tax on trade in commodity futures and government reluctance to let financial institutions enter the market.
"We have rescheduled the time and speed of our launches," says Unupom Kausik, chief business officer of NCDEX, which has a 21 per cent share of the market. The exchange aims to introduce four or five new contracts by the end of this year, he said.
Whether that helps it close the growing gap with the MCX remains to be seen, analysts and traders say.
"New contracts may help [gain volumes] to some extent," said Suresh Nair, head of commodities at MAPE ADMISI Commodities. "Every thing is a try-and-see-how-it-works."
Since India first allowed commodities futures trade five years ago, MCX has grown to capture 75 per cent of India's of the market, helping catapult founder Jignesh Shah to the Forbes' list of billionaires. Trading volumes have risen by 18 per cent over the first half of this year.
Roaring trade in gold, silver and crude oil futures has rapidly emerged, aided this year by Indian investors following their global peers in shifting funds away from poor performing stock markets and toward booming commodities.
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