If there was no further policy reform, India’s commodity exchange sector might stagnate soon, said a majority of participants at the third annual Leadership Summit on The Future of Financial Markets (FOFM) 2011 organised by the Financial Technologies Group.
The summit, which has recognised January 21 as the Exchange Day, was attended by 590 experts from Indian and overseas markets. The participants include global and local-regulators, exchange industry professionals, policy makers and financial market experts.
About 72 per cent of participants voted for the proposition which said: “Within the existing regulatory framework, the commodity exchange sector in India has largely run its course and there are few drivers for further development.”
Only 21 per cent believed that even without a regulatory and policy push, Indian commodity exchanges could grow.
The poll was important in the current context — the 2010 commodity futures market size crossed the Rs 100-trillion mark and growing at 40 per cent and above since the last three years, with a larger base.
However, 2010 has also been the year of high commodity prices across the sector and if price rise is factored, the market has been stagnating.
Vineet Bhatnagar, MD, MF Global, said there were several limitations in today’s market – the absence of a variety of instruments and deep-pocket participants and the fact that natural participants like banks and institutional players are being artificially kept away from commodity futures. He said it was time for a new regulatory and policy drive.
Priti Gupta, ED, Anand Rathi, said hedgers were feeling insecure in today’s market and reforms were necessary. Jayant Manglik, president, Religare Commodities, even favoured FIIs in the market.
Ashima Goyal, professor, Indira Gandhi Institute of Development Research, however, disagreed with the view that without a policy drive themarket could not grow. She said this kind of view represents a psychological weakness, holding the other side responsible for something not happening. “Foreigners see tremendous potential in Indian markets, while we say that it is not so in the current environment.”
