Trade on comexes set to double

By 2010, the commodity market will grow 30 per cent to cross Rs 74,00,000 cr.

Trade volume at the country's commodity exchanges is likely to more than double by 2010, with rising participation by people attracted by the soaring prices of commodities such as gold, silver and crude oil, industry body Assocham said.

"Indian commodity market, which expanded 50 times in a span of five years, is now expected to grow by 30 per cent to touch Rs 74,15,613 crore by 2010," Assocham said in a release.

The futures market grew by 23 per cent to Rs 33,753,36 crore last year from Rs 27,39,340 crore in 2006, it said.

The jump in turnover of commodity exchanges are expected on the back of people's participation in such trade, which will continue, according to the finding of a survey jointly carried by Assocham and Evalueserve.

In 2003, the size of futures trading carried on commodity exchanges such as MCX, NCDEX and NMCE stood at Rs 1,29,364 crore. The turnover went up to Rs 5,71,759 crore in 2004 and to Rs 21,55,122 crore in 2005.

The turnover as proportion to GDP of commodity trade increased from 4.7 per cent in 2004 to 18.3 per cent in 2006 and is expected to go up many folds since commodity markets would remain friendly to its subscribers, Assocham President Venugopal N Dhoot said while releasing the survey.

The daily average volume of trade in commodity exchanges was over Rs 12,000 crore in December 2007, it said, adding that gold, silver and crude recorded the highest turnover at MCX while at NCDEX, soya oil, guar seed and soyabean were the most actively traded commodities.

Pepper, rubber and raw jute were some of the items that performed better compared with other commodities at NMCE. The study points out that futures trading in commodities results in transparent and fair price discovery on account of large-scale participation of entities associated with different value chains.

This reflects upon the views and expectations of a wide section of investors related to commodities. It also provides an effective platform for price-risk management for all segments of players ranging from producers, traders, processors, exporters, importers and the end-users of a commodity.

However, domestic commodity exchanges are still at a nascent stage of development as there are numerous bottlenecks hampering their growth, Assocham said.

Some of the major problems associated with commodity markets in India include infrastructure, trading system, broking community, controlled market, non-integration of regional and national exchanges as also of spot and futures markets.

"Though some exchanges occupy large premises, they are deficient in terms of the necessary institutional infrastructure, including warehousing facilities, independent and automated clearing houses and transparent trading platforms."