Futures volume witnesses 20% fall amid festive season

India's leading commodity exchanges - the National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange (MCX) -have seen a fall in volumes by 20 per cent in the last week.

According to sources, the lack of interest and involvement by traders and brokers in the futures market amid Diwali festivities had resulted in the decline in volumes.

Ajay Kedia, managing director of Kedia Commodity Comtrade Private Limited, said, "Generally, markets face slightly down trend in each festivals but this time Diwali has seen more fall in volume by 20 per cent. Among these, agri commodities volumes have been affected the most this time."

While the combined average fall in volumes were around 20 per cent, individually that of MCX fell by 29.78 per cent and NCDEX by 11.55 per cent during November 3-9 leading up to Diwali festival.

A week ago, MCX registered futures volumes worth Rs 2,280.6 crore, while the same fell by 29.78 per cent to stand at Rs 1,601 crore as on November 9. Similarly, NCDEX declined from Rs 543.5 crore to Rs 480.8 crore just in a week.

Moreover, social engagements during the week leading up to the Diwali festival has also resulted in reduced working hours in the future market.

"Family and fun becomes more priority at this time, which has reflected on the volumes. People like to spend money on family for Diwali shopping than on future markets," said Shivendra Sharma, assistant vice-president, Lalshmishree Commodity Pvt Ltd.

  The other reason being attributed to such a fall is the aversion to risk among traders amid a downward trend in the commodities futures market since the last 15 days. According to experts, participants prefer to remain in cash position instead of take.

"During the holiday period, participants do not prefer to be in the hold position due to their aversion to risk. This has also trimmed volumes," said Kedia.

In the regional exchanges also volumes have moved down this time. For instance, at Rajkot Commodity Exchange (RCX), known primarily for castor seed futures, participation has declined in the last couple of days.

"Many broker-members and participants have shut shop early and due to festival time, traders are not in mood for trading since last one week," said a source at RCX.