C.J. Punnathara

Kochi, Nov 9

COMMODITY futures is fast spreading into rural India at a much faster pace than capital market operations.

Though there are seven terminals owned by different stock broking firms in Kalpetta in the hill district of Wayanad in Kerala, Mr Satheesh Kumar is still reluctant to upgrade his commodity terminal into a dual-purpose one dealing in both commodities and equities.

He is a franchisee of the Kochi-based JRG Wealth Management Company.

"On an annualised basis, volumes from commodity futures and capital market operations would be 50:50 for most of the brokers in Kalpetta. And it is not that the existing stock market operators are switching over to commodity trading, rather that new customers, especially pepper traders are coming into commodity trading," Mr Suhag Muhammed, a franchisee of Select Securities in Kapletta, said.

"There is no need to educate the pepper and coffee traders on the nuances of commodity price movements. They have been able to assimilate into futures trade with aplomb. However, our commodity volumes still remain around 35 per cent," Mr Jose Mathew, franchisee of Geojit at Kalpetta said.

"Six months into commodity futures operations and its volumes rival those of our six year-old stock market operations. And our new customers are not farmers or grain traders, rather gold merchants and shopkeepers - trading in gold, silver and crude oil. From crude oil alone our single terminal used to generate volumes of Rs 27-30 crore a day, when there was greater volatility in the international crude markets," Mr C.V. Muralidharan, franchisee of JRG in the mofussil township of Pattambi, said.

Seeing the immense potential and response from rural India, some companies have begun to pay increased attention to commodity futures markets.

Mr Giby Mathew, Managing Director of JRG Wealth Management Company, said: "In the last couple of years, we have been able to achieve in commodity market what it took us 13 years to accomplish in the stock market business.

The volumes in stock and commodity market business is neck-and-neck and we are confident that commodity volumes will outstrip stock market volumes before the end of the current year."

The company has 310 terminals spread across the country - of which 140 terminals undertake both commodity and capital market operations and 170 undertake exclusively commodity operations.

These are often in rural agrarian pockets where the people are not interested in equity.

"While JRG Securities, which is into capital market operations generate a volume of Rs 200-225 crore everyday, its subsidiary, JRG Wealth Management Company, generates volumes of Rs 175-200 crore everyday through commodity futures transactions. Going by the present tempo of the commodity business, the potential seems huge," Mr Reji Mathew, Managing Director of JRG Securities, said.

The company expects commodity futures volumes to touch Rs 500 crore per day before the end of the current year.

Though the volumes and value of commodity futures have surged since trading in gold, silver and crude futures commenced, a stock-broker with a one of the larger firms said that it will take a long while yet for commodity operations to catch up with stock market, both among the bigger players and at the national level.

(This article was published in the Business Line print edition dated November 10, 2005)
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