NCDEX to introduce gold contracts with option to hedge more

Our Bureau | | Updated on: Mar 12, 2018

Re-launches long steel product futures

The National Commodity and Derivatives Exchange(NCDEX) has sought the approval of commodity market regulator Forward Market Commission for newly-designed gold contract.

“The new product will have higher hedging portion than the delivery portion,” Samir Shah, Managing Director in-Charge of NCDEX, told reporters here. It can be launched as soon as approval is obtained. This exchange, better known as platform for agriculture produce, has a negligible share in gold future market. In an effort to control Current Account Deficit or difference between payment made and received in dollar, the Government hiked import duty on gold to 15 per cent. At the same time, there was ban on importing gold coins and medallion. The Government also introduced 80:20 scheme for gold import where 20 per cent of the gold imported needs to be re-exported.

Shah said that due to all these measures delivery of gold in forward contract has dropped but the volume might not have come down. Such a trend necessitated for a new product. However, along with new product, existing one will also be there as import curbs are unlikely to be forever, Shah added.

Contract for steel

Along with gold, the exchange aims to strengthen foothold in metal segment. With this, it has re-launched contract for long steel product. This is only exchange proving such a contract. The earlier contract was discontinued after the Bureau of Indian Standard norms were mandated by the Government in September 2012.

Currently, out of total steel production of 78 million tonnes, long steel product counts for 36 million tonnes. “Even if we take one per cent open interest of this quantity, we expect total turnover for steel long futures to touch Rs 1,000 crore in next 6-12 months,” Shah said adding that the exchange intends to achieve 20-30 per cent of trading turnover from non agricultural commodities in next 2-3 years.

Steel producers and market intermediaries believe that new products will help all as it will result in price discovery. Ashok Agarwal of Globe Capital said that end-users will benefit from hedging in view of high volatility .

D.K. Agarwal of SMC Capital said that during previous contract, delivery reached as high as 80,000 tonnes a day. He hoped that it could increase as India is now one of the largest producers and consumers of steel products.


Published on November 21, 2013
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