The Hindu : Business : Commodities futures offer fresh opportunity to investors in State

Online edition of India's National Newspaper
Wednesday, Oct 26, 2005

Business

Business

Commodities futures offer fresh opportunity to investors in State

R. Ramabhadran Pillai

About 100 commodities being traded in commodity exchanges

KOCHI: The Indian commodity futures industry is offering fresh opportunities to the investors. The three national commodity exchanges and more than a score regional exchanges are trying to take the industry to new heights.

The Forward Markets Commission, the monitoring body of the national exchanges, sees bright prospects for the industry. There has been a quantum jump in the volume of trade on the commodity markets, observes S. Sundareshan, chairman of the FMC.

The volume has jumped more than 100 per cent in the first six months of the financial year.

About 100 commodities are being traded in the commodity exchanges now. These include seeds, oils, oil cakes, metals, spices and pulses. The list will be expanded in due course of time.

The history of futures market dates back to 1875 when trading in cotton was started under the aegis of the Bombay Cotton Trade Association.

The trading was later expanded to oilseeds, jute and foodgrains. The futures trading gathered momentum in the first half of the last century. Groundnut, groundnut oil, castor seed, wheat, rice, sugar and precious metals like gold and silver were among the commodities traded. But the futures trading was banned under the Defence of India rules during the Second World War.

After Independence, futures trading was regulated under the Forward Contracts (Regulations) Act, 1952. The trading gained fresh impetus at the national level. Again, the futures trading was prohibited in mid-sixties owing to scarcity of various commodities.

The trading was permitted only in pepper and turmeric.

There was a renewed surge in the futures trading in the Nineties in the wake of liberalisation. In 1999, the Government removed all commodities, including foodgrains, pulses and bullion, from the restrictive list. This provided the thrust sought by those keen on futures market operations. The regional exchanges apparently lacked the infrastructure to take up fresh challenges in the commodity trade. This paved the way for establishing nationwide multi-commodity exchanges with investment support by public and private institutions. National Multi-Commodity Exchange of India Limited (NMCE) was the first such exchange to be granted recognition by the Government.

It is promoted by commodity-relevant public institutionssuch as the Central Warehousing Corporation (CWC), National Agricultural Cooperative Marketing Federation of India (NAFED), National Institute of Agricultural Marketing (NIAM), Gujarat Agro Industries Corporation Limited (GAIC), Gujarat State Agricultural Marketing Board (GSAMB) and Neptune Overseas Limited (NOL).

The Punjab National Bank has taken equity of the exchange, providing the financial support.

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