The Hindu Business Line : Investor interest in commodities on the rise

NEW LOOK: Mr Sumesh Parasrampuria, Senior Vice-President & Head-Commodities, Motilal Oswal, Mr Nilesh Shah, Chief Investment Officer, Prudential ICICI Mutual Fund, and Mr Sanjeev Agarwal, Managing Director, World Gold Council, at the CNBC Awaaz Commodities Camp in Mumbai on Saturday. — Shashi Ashiwal

Mumbai , Aug. 26

Commodities have begun to attract investor interest and are fast emerging as an asset class. Rapidly rising consumption demand and limited potential for supply increase make the outlook for both base and precious metals bright, according to experts.

Industry experts, brokers, fund managers and exchange officials presented their market outlook on a range of commodities at the CNBC Awaaz Commodities Camp here on Saturday.

In 2006-07, base metals are expected to perform well. While the copper market would be in deficit, supply of aluminium would trail demand seen rising in Western Europe, North America and Asia, according to Mr Srikant Saboo of Hindalco industries. The demand-supply mismatch would have an impact on prices.

Demand for gold up

Echoing similar sentiment for gold the demand for which, particularly for jewellery production, has been rising fast , Mr Sanjeev Agarwal of World Gold Council pointed out that mine production was unable to satisfy demand.

Jewellery consumption has increased by 10 per cent in the last five years and the investment demand is up by 56 per cent in three years.

Arguing that investment in gold not only leads to portfolio diversification but also minimises risk, Mr Agarwal asserted, "Fifteen per cent of an investor's portfolio should have investment in commodities".

Positive outlook

That funds are upbeat about the positive outlook for commodities is supported by the expected flow of about $120 billion in commodities market worldwide in 2006 compared with $80 billion in 2005.

Leading commodities futures bourse National Commodities and Derivatives Exchange plans to set up organised electronic cash markets, which would create virtual mandis, according to Mr Narendra Gupta, a senior exchange official.

A right balance between commodities and commodity stocks would be an ideal option to diversify portfolio and reduce risk, Mr Nilesh Shah, CIO, Prudential ICICI Mutual fund remarked.

More Stories on : Commodity Exchanges | Gold & Silver | Metals

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