The Hindu Business Line : `Volumes in commodities futures may overtake stock market'

TRADING in online commodities futures may overtake trading volumes on the stock markets over the next few years since the country depends largely on agriculture, which offers a range of commodities for trading, a senior executive of Geojit Financial Services Ltd has said.

According to Mr K.V. Sanilkumar, Assistant Vice-President, GFSL (Chennai), within two or three years, commodity volumes will be 10 times higher than that of the stock markets. He based his optimism on the fact that the risk of trading in commodities market was less and that India was largely dependent on agriculture. Trading in commodities futures offered the advantage of just paying a 10 per cent margin and taking position rather than hunting for warehouses to store the goods, he said.

Geojit Financial entered commodities futures trading through a wholly owned subsidiary, Geojit Infofin Technologies Ltd, a year ago. The company plans to open 60 more offices in Tamil Nadu alone during the current financial year in view of the potential in commodities futures trading, Mr Sanilkumar said.

Speaking to Business Line here, he said Tamil Nadu accounted for about 20 per cent of commodities futures trading through GFSL terminals. The daily trading in the State was about Rs 25 crore to Rs 30 crore out of the national daily business (through Geojit terminals) of around Rs 150 crore-Rs 200 crore. The company plans to increase daily trading volume to about Rs 500 crore.

Mr Sanilkumar said Geojit's subsidiary had tied up with National Multi Commodity Exchange (NMCE), National Commodity and Derivatives Exchange (NCDE) and Multi-Commodity Exchange (MCE) to facilitate trading in commodities. Apart from metals such as gold and silver, the commodities traded through the exchanges included rubber, pepper, cardamom, turmeric, pulses and oil. He said the potential for specific commodities varied from centre to centre. While he saw "excellent" potential for gold and silver futures trading in Chennai and Bangalore, in other locations in Tamil Nadu (Coimabtore, Erode and Madurai), there was good potential for futures trading in agricultural products such as pepper, turmeric and pulses, apart from edible oil and coconut oil. In Kerala, the potential was for rubber, pepper and cardamom while in Andhra, it was rice.

Mr Sanilkumar said the advantage of futures trading in commodities, which Geojit entered about a year ago, was that it provided hedging facility to investors, who were mostly those associated with commodities as cultivators or dealers. Whenever the stock market witnessed a downturn, part of speculative activity shifted to commodities trading.

On ensuring transparency in trading and ensuring informed trading in commodities, he said trading in commodities was like trading on either the BSE or the NSE; it was screen-based trading and the company offered research inputs.

In Kerala, Geojit had conducted 1,000 investor meets and it planned to conduct 500 investor meets in Tamil Nadu this year to educate them about trading in commodities futures.