After 2 years, commodity futures market back in black

After a gap of two years, the commodity futures market turned positive in the first three months (April-June) of the current fiscal, spurred by news about a deficient monsoon.

However, bullion and other metals saw a bad quarter due to global factors.

According to data on various commodity exchanges prepared by the Forward Markets Commission (FMC), total commodity futures trading grew by 15.8 per cent during April-June.

Although the overall trade value has improved after a six-year low last year, it is still way below the ₹41.72 lakh crore recorded in 2012-13, or even ₹24.56 lakh crore in 2010-11.

During the quarter, the maximum volumes were generated in energy items, such as crude oil, followed by agricultural and metal items.

Food items such as chana, refined soya oil, jeera and rapeseed/mustard seed contributed a major share to the total value of trade in agricultural commodities, in non-food items, castorseed and guarseed contributed a big share in the commodity futures trading.

The basic reason for the growing interest in agri-commodities is news about a deficient monsoon.

However, as soon as data about good monsoon start pouring in, prices of such commodities started falling.

In fact, total trade value of such commodities during second fortnight of June (June 16-30) saw negative growth after four fortnights.

Yet, the quarter as a whole saw growth of 19 per cent compared with the first quarter of last fiscal.

Investors avoided bullion due to the global sell-off in commodities and higher volatility in international markets.

Since, China is the biggest gold consumer now, the situation there affected gold prices in a big way.

The situation in Greece also affected gold and the entire metal block.

However, experts feel the coming days in such a market will depend upon how quickly the government starts working on major projects, such as 100 smart cities, road development etc. The market will also eye what steps mining and other big companies take.

Looking forward, Vandana Bharti, Assistant Vice-President (Commodity) with SMC Global Securities Ltd, felt that volume and confidence in the commodity markets are set to rise after the complete merger of FMC & SEBI.

“The integration of commodity market entities with the securities segment paves the path for introduction of various products which did not materialise under the ambit of Forward Contracts Regulation Act. Introduction of the specified instruments will also entail varied institutional participation, including Banks, Mutual Funds, and Foreign Portfolio Investors,” she said.

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