Financial Daily from THE HINDU group of publications
Saturday, Jul 31, 2004
Financial Daily from THE HINDU group of publications Saturday, Jul 31, 2004 |
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Agri-Biz & Commodities
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Derivatives Markets MCX flags off cotton futures Our Bureau
Mr Vishwa Nath, Chairman and Managing Director, Cotton Corporation of India, flanked by Mr Venkat Chary, Chairman, Multi Commodity Exchange, and Mr Jignesh Shah, Managing Director, MCE, while launching futures trading in cotton in Mumbai. — Shashi Ashiwal
Mumbai , July 30 COTTON futures trading, launched by Multi-Commodity Exchange of India Ltd. (MCX) on Thursday evening, commenced with a discount of nearly Rs 2,000 per candy over the spot price ex-Mumbai on hopes of revival of monsoon. Mr Vishwa Nath, Chairman and Managing Director of the Cotton Corporation of India (CCI), inaugurated futures trading in Medium Staple (25 mm) and Long Staple (28 mm) on Thursday. "First trade of November 2004 contracts — the first contract available for trading at MCX platform — was done at Rs 18,900 per candy for medium staple and Rs 21,200 per candy for long staple as against spot price of Rs 20,900 and Rs 23,200 per candy respectively, quoted on Thursday, Mr Bhavik Mehta, director of Soham Cotton Trading Private Ltd, a MCX member told Business Line. "The November 2004 contracts today opened at Rs 19,250 per candy for medium staple and Rs 21,600 per candy for long staple with good trading enquiries. Number of trades were about 5 units," Mr Mehta said. The unit of trading for the MCX contract is 26 candy (55 bales approx.) with maximum order size of 130 candy. The margins for the cotton contracts will be 3 per cent and the delivery samples will be certified by MCX approved surveyors. The deliveries will be tendered in the multiples of 55 bales, with delivery centre located within 25 km outside Mumbai Octroi limit. The ginners and cotton traders can lose heavily when the market goes up and they have made forward sales. Textiles mills may be saddled with higher cost inventory through out the lean season when prices fall drastically making their operational unviable. It is due to these reasons that the futures trading in cotton is very crucial for these sectors and can play a very important role in smoothing the effects of ups and downs in the prices," Mr Vishwa Nath said, in his inaugural address. "Our main aim in choosing medium and long Staple Cotton Futures is to provide a hedging facility for price volatility in cotton trading. Analysis carried out by MCX has found that contracts in these varieties act as a good hedge for price volatilities," Mr Jignesh Shah, Managing Director of MCX, said. "Indian cotton production fluctuates between years as it is highly dependent on monsoon and pest attacks, which leads to high fluctuation in prices too. As a result, cotton producers, merchants and stockists are exposed to high risk on their production, purchase and stocks. Similarly the exporters and spinners are exposed to heavy risks from adverse price increase on their overseas or domestic sale commitments of fibre or yarn for delivery at a later date. Futures trading in cotton, is likely to give an effective tool in farmers and traders hand to hedge their price risk," Mr Shah said. Futures trading in cotton will help farmers and traders to hedge their price risk. An active cotton futures contract, which is expected to cross the Rs 10,000-crore mark annually in the next few years, would bring the producers and the consumers to the futures exchange because of its efficient pricing mechanism and liquid market.
More Stories on : Derivatives Markets | Cotton
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