Volatile commodity prices drive turnover on comexes

The huge volatility in commodity prices and sharp drop in returns from equity investments have helped commodity exchanges register rise in turnover during the financial year ended March 2016.

The turnover of MCX, the country’s largest commodity exchange, was up eight per cent at ₹2.63 lakh crore in the financial year ended March 2016, against ₹2.44 lakh crore recorded in the same period last year.

Similarly, agriculture-focused commodity exchange NCDEX recorded 12 per cent increase in its turnover at ₹47,550 crore (₹42,500 crore).

However, NMCE, which is dependent largely on three commodities – rubber, RM seed and guarseed – registered an 18 per cent drop in turnover at ₹1,363 crore (₹1,672 crore) due to lack of liquidity.

Ajay Kumar Kedia, Director, Kedia Commodities, said trading interest in agriculture futures gained due to the unseasonal rain late last year and volatility in prices while the uncertainty of the US Fed rate cut supported hedging on gold.

Prices of few agriculture commodities such as chana, jeera, turmeric, soyabean and sugar gained substantially in volatile trade during the second half of the fiscal, he said.

In fact, he added, the volatility and price rise in castorseed was so high that the NCDEX had to suspend trading in the contract abruptly in January.

The sharp fall in gold prices led to a fall in turnover of MCX between November and January.

However, it managed to register a positive growth in turnover due to volatility in the yellow metal .

Navin Mathur, Associate Director (Commodities & Currency), Angel Broking, said commodity markets attracted lot of money from equity markets as the commodity prices reversed its bearish trend.

Hedgers flocked to commodity markets due to volatile crude oil and gold prices, he said. In fact, the March quarter is set to deliver the best returns in last 30 years even as the uncertainty on US Fed rate hike lending some support in coming days.

Trading volumes in crude oil jumped 90 per cent to 49,434,805 lots, while that of zinc and lead was up 81 per cent and 53 per cent to 4,865,540 lots and 3,697,458 lots, respectively.

However, gold and silver volumes grew marginally by four per cent and two per cent on a higher base.

On the other hand, equity markets logged in their worst performance in last four fiscals.

The benchmark Sensex plunged 9.36 per cent in FY’16, leaving investors poorer by about ₹7 lakh crore or over ₹2,700 crore per trading session as the foreign fund pulled out money from India.

COMMENT NOW