Commodity futures offer a safe, scientific way of hedging price risks, besides opening up another avenue of investment, according to Deepak Sayana, Deputy Manager, NCDEX.

He was speaking here today at a seminar on stakeholders’ awareness and education on agribusiness and commodities organised by the Hindu Business Line in association with NCDEX and Forward Markets Commission.

He said the five national commodity exchanges and 21 regional exchanges offere a safe, standardised futures trading opportunity for traders to mitigate price risks. Transaction costs would be low and there would be no counter party credit risk in transactions conducted through commodity exchanges, he said. He said NCDEX has emerged as the sixth-largest commodity exchange in the world, with a daily volume of Rs 6,000 crore.

Twenty-four commodities were being traded presently on the exchange and it was growing annually at 29 per cent.

He said options and indices need to be introduced in future in the commodity exchanges, as they would be more beneficial to farmers. Banks and MFs should also be allowed to participate and warehousing reforms would also be needed. There was also a need for improvement in grades and standards, he added. As commodities markets mature in India, these changes would be introduced.

Earlier, A. Anjaneyulu, President of the Indian Chamber of Commerce, said many local merchants and traders burnt their fingers while trading in commodities, and there should be greater regulation and control over futures trading. There should also be a ceiling on quantities, he felt. Though futures trading may be good in principle, the Government should bring about many changes in policy to make it useful to the traders and farmers.

G. Chandrasekhar of the The Hindu Business Line earlier explained the features of commodity futures trading and how it would help in hedging price risks in the commodities market. A similar seminar was held in Vijayawada on Thursday. M. Muralikrishna, President of the Andhra Chamber of Commerce, said there is a need to conduct more such programmes to enhance awareness about the commodities market.

N. Venkateswarlu, President of the Siddharth Academy, said commodities market had assumed great importance of late.

Deepak Sayana, Deputy Manager, NCDEX, said commodities exchanges lowered the transaction costs, standardised the contract size and also eliminated the credit risk.

(This article was published on February 1, 2013)
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