 "Commexes' turnover declines 36% in nine months")
India’s five top commodity futures trading exchanges have lost 36 per cent of their accumulative turnover in the first nine months of the current financial year due to poor sentiment in commodity trading, levy of commodity transaction tax (CTT) and fund diversion from commodities to equities.
The period between April and December in 2013, the five largest commodities exchanges witnessed a total turnover of Rs 82,87,559 crore as compared to Rs 1,29,49,836 crore in the corresponding period last year.
“The commodity volumes have taken a severe hit in the last six months largely due to implementation of CTT; fall in commodities volatility and volumes globally, negative sentiment due to NSEL fiasco and high impact cost. CTT is major reason for lower volumes, low liquidity and higher impact cost,” Ashok Mittal, chief executive officer, Emkay Commotrade Ltd.
The finance ministry levied CTT of 0.10 per cent from less than 0.2 per cent earlier effective from July 1. Naveen Mathur, associate director of Angel Broking, said CTT along with weak global sentiment towards commodities could be attributed to the fall in turnover on Indian commodity exchanges.
Kotak-anchored Ace Derivatives & Commodity Exchange recorded the sharpest fall in the turnover followed by the largest commodity exchange – the Multi Commodity Exchange (MCX) and National Commodity & Derivatives Exchange (NCDEX). Ace witnessed over 74 per cent erosion in the turnover to Rs 34,673 crore in the first nine months of the current financial year from Rs 1,33,826 crore in the corresponding period last year.
“Many short-term derivatives traders have also shifted to equity F&O segment due to improved sentiment in equities market which have been doing well in last few months. The lower volatility and higher bid-offer spread (impact cost) has hit intraday traders since the cost of doing transaction has gone up drastically for them which is the main reason for fall in commodities volumes in last six months,” Mittal said.
Sugandha Sachdeva, assistant vice-president and incharge (metals, energy and currency research), Religare Securities Ltd, believes the commodity exchanges’ turnover declined due to rupee depreciation also which increased volatility in commodity prices forcing the regulator to raise margins frequently in globally traded commodities apart from the reasons cited above.
“The sentiment in commodity futures market was hit badly due to margins levy. While the margins were removed on November 9, the actual impact of the margins levy will be seen coming months. The reformative steps taken by the Federal Open Market Committee (FOMC), including gradual tapering in the monthly bond buying programme by the United States to $75 billion from $85 billion earlier, forced hedge funds and portfolio managers to readjust their commodity portfolio. Their skewed investment towards equities earlier will see a reverse move in commodities in coming months,” Sachdeva added.
Source: Exchanges, compiled by BS Research Bureau
The period between April and December in 2013, the five largest commodities exchanges witnessed a total turnover of Rs 82,87,559 crore as compared to Rs 1,29,49,836 crore in the corresponding period last year.
“The commodity volumes have taken a severe hit in the last six months largely due to implementation of CTT; fall in commodities volatility and volumes globally, negative sentiment due to NSEL fiasco and high impact cost. CTT is major reason for lower volumes, low liquidity and higher impact cost,” Ashok Mittal, chief executive officer, Emkay Commotrade Ltd.
The finance ministry levied CTT of 0.10 per cent from less than 0.2 per cent earlier effective from July 1. Naveen Mathur, associate director of Angel Broking, said CTT along with weak global sentiment towards commodities could be attributed to the fall in turnover on Indian commodity exchanges.
Kotak-anchored Ace Derivatives & Commodity Exchange recorded the sharpest fall in the turnover followed by the largest commodity exchange – the Multi Commodity Exchange (MCX) and National Commodity & Derivatives Exchange (NCDEX). Ace witnessed over 74 per cent erosion in the turnover to Rs 34,673 crore in the first nine months of the current financial year from Rs 1,33,826 crore in the corresponding period last year.
“Many short-term derivatives traders have also shifted to equity F&O segment due to improved sentiment in equities market which have been doing well in last few months. The lower volatility and higher bid-offer spread (impact cost) has hit intraday traders since the cost of doing transaction has gone up drastically for them which is the main reason for fall in commodities volumes in last six months,” Mittal said.
Sugandha Sachdeva, assistant vice-president and incharge (metals, energy and currency research), Religare Securities Ltd, believes the commodity exchanges’ turnover declined due to rupee depreciation also which increased volatility in commodity prices forcing the regulator to raise margins frequently in globally traded commodities apart from the reasons cited above.
“The sentiment in commodity futures market was hit badly due to margins levy. While the margins were removed on November 9, the actual impact of the margins levy will be seen coming months. The reformative steps taken by the Federal Open Market Committee (FOMC), including gradual tapering in the monthly bond buying programme by the United States to $75 billion from $85 billion earlier, forced hedge funds and portfolio managers to readjust their commodity portfolio. Their skewed investment towards equities earlier will see a reverse move in commodities in coming months,” Sachdeva added.
Source: Exchanges, compiled by BS Research Bureau