Goldman Sachs Group and Fidelity International may win more time to cut their holdings in two of India’s biggest commodity exchanges to abide with a government rule limiting their stakes.
India capped ownership at 5 per cent for a single overseas investor last year, with a 49 per cent overall ceiling, and gave the exchanges until June 30, 2009, to comply. The bourses want the deadline extended to March next year, said B C Khatua, chairman of the Forward Markets Commission, the market regulator.
India’s main stock index had its worst annual drop on record in 2008 as overseas funds pulled out $13 billion, the most since they were allowed into the nation in 1993, undermining efforts by Multi Commodity Exchange of India (MCX) and the National Commodity & Derivatives Exchange (NCDEX) to find investors for the stakes.
“When the government set the rules, one didn’t expect the markets to fare so badly,” Khatua said. “It is a fair demand considering that foreign investors will find it difficult to get buyers in the current market conditions.”
India, the world’s largest consumer of gold and the second-biggest producer of wheat, rice and sugar, bars overseas funds from directly trading commodity futures. Investing in exchanges is the only way for foreign funds to tap a market where turnover is forecast to grow to $960 billion by March 2009.
Goldman owns a 7 per cent stake in NCDEX, while Fidelity has a 9 per cent stake in MCX. Citigroup, Merrill Lynch and NYSE Euronext own 5 per cent each in MCX, which accounts for more than four-fifths of all the commodities traded in the South Asian nation.
Intercontinental stake
Goldman acquired the stake in NCDEX in 2006 after securing permission from the regulators including the central bank. The Intercontinental Exchange owns 8 per cent of the bourse.
The Mumbai-based exchange has sought more time to comply with the rule on behalf of Goldman and Intercontinental, said Unupom Kausik, chief business officer at the bourse. Joseph Massey, managing director of MCX, wasn’t immediately available for a comment, spokesman Akshay Jain said. The exchange deferred an initial share sale in August citing a slump in the stock market.
Edward Naylor, the Hong Kong-based spokesman for Goldman, declined to comment.
