Gold futures too rise in April-June; agri-commodities turnover takes a hit

The wild swings in stock, currency and gold prices in recent months seem to be keeping one set of people happy — the traders and speculators.

Turnover in both equity and currency derivatives on the National Stock Exchange’s platform increased sharply between April and June.

Sample these: The average monthly turnover in the equity derivatives segment of the NSE increased 27 per cent to Rs 31.9-lakh crore in the last three months over the same period last year. The monthly turnover is the highest since 2010.

The monthly turnover in the currency futures platform of the NSE zoomed to Rs 5.8-lakh crore during the quarter, from Rs 17,949 crore in the same period last year.

Higher price volatility has been key to the increase in trading volumes, say market observers. Siddarth Bhamre, Head-Equity derivatives, Angel Broking, said, “Implied volatility in the equity market averaged 20 per cent in the last three months, up from 13 per cent in March and speculators have used this to their advantage”.

In the currency futures market too, the rupee’s oscillation in the 54.5-60.7 band in the April-June period offered traders room for quick gains from speculation. Gold futures contracts on the MCX too saw turnover increase 12 per cent. Here, gold traders had the twin benefits of a volatile rupee and falling gold prices.

Waning interest

However, one segment where the turnover has tumbled is agri-commodity futures. The monthly turnover in the National Commodities and Derivatives Exchange (NCDEX) dropped by a third to Rs 89,000 crore in the April-June quarter. Pepper, potato, chana, guar and guar gum are some contracts where volumes have dropped sharply.

The waning interest in agri-commodity futures follows the actions taken by the Forward Market Commission, say market players.

Vedika Narvekar, Chief-Manager, Agri Commodities, Angel Commodities Broking, said, “Volumes in agri-commodity futures started declining after the guar fiasco shook investor confidence last year.

“And the proactive moves from the FMC since then to curb excess volatility in the futures market by imposition of additional and special margins in some contracts and the staggered delivery mechanism, have put off market participants.”

The drop in price of commodities too could be a reason, says Dharmesh Bhatia, Deputy Vice-President-Research, Kotak Commodities. “The good monsoon showers have hit prices of several commodities. Contracts in chana futures are in fact trading below the MSP of Rs 3,200/quintal now.

“Till prices revive, volumes may not look up. In all good monsoon years, commodity futures markets get into a bearish phase and speculative volumes move to other market segments.”

(This article was published on June 30, 2013)
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