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Traders in the Indian market were more active in commodity and currency derivatives after 2009 as equity prices slumped.
But heightened regulation and restrictions on both commodity and currency derivatives this calendar has made traders move slightly away from these segments.
In 2010-11, trade in commodity derivatives was equivalent to 40.8 per cent of the value of equity futures and options contracts. In 2011-12, this shot up to 56.4 per cent. But in the April-July this year, the value of commodity derivatives trading has shrunk to 41.4 per cent of equity derivatives trade.
Tough stance
In a similar fashion, the value of currency trading as a percentage of the turnover of equity derivatives rose from 30.9 per cent in 2010-11 to 32.2 per cent in 2011-12, but fell to 26.9 per cent in the first four months of 2012-13.
In the case of commodities, regulator Forward Market Commission’s aggressive stance to curb volatility and speculative trade in the futures market was the main factor depressing trade. Since April, the FMC has imposed trading curbs on soyabean, soya oil, mustard seed and chana future to check excessive volatility in these contracts.
The ban on trading of guarseed after a 10-fold surge in prices due to speculation — which some said smelt of a scam — has also vitiated interest in the commodities market. The sideways movement of gold futures prices in recent times further contributed to the subdued trading activity.
Similar policy action was responsible for the lull in currency derivatives trading. Towards the end of May, the RBI had stipulated that the forex positions on stock exchanges cannot be netted by undertaking positions in the inter-bank forex market and vice-versa.
Position limits were also imposed for banks for trading on exchange-traded futures and options segment. This move curbed trading activity of banks in exchange traded currency futures.
Currency’s good show
Currency derivatives trading has grown by leaps and bounds ever since its introduction in 2008-09. The cumulative value of currency derivatives trades in the country shot up 260 per cent during the 2009-10 to 2011-12 period.
However, equity futures and options are still the largest derivatives class in the country. The cumulative value of equity derivatives trades on the BSE and the NSE totalled Rs 321.5 lakh crore in 2011-12, more than the combined turnover in the currency and commodities derivatives segments of exchanges across the country.
The value of equity derivatives trade on the BSE and the NSE grew by 82 per cent during the 2009-10 to 2011-12 period. In contrast, the cumulative value of commodity derivatives trade grew by 133.4 per cent.
>arvind.jayaram@thehindu.co.in
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