New Delhi: Stock markets are shining the brightest in the investors’ world at the moment, but going forward the commodity market is likely to steal the limelight with the “next bull run”, say experts.
“It (commodities) is a virgin market, but has the potential of 50 times more from where it is today. The next bull run is not in stocks, not in bonds, but in commodities,” National Commodity and Derivatives Exchange Ltd (NCDEX) Chairman P H Ravikumar told PTI.
Every investor wants to hold a Reliance or a Infosys share but not a commodity futures contract, he said, adding investors have not explored the commodities market as yet.
The industry players believe the stock market growth has been led by huge inflows from foreign investors, banks and other large investors and the same is needed to propel the commodity market into its next growth orbit.
“Investors must realise that Sensex touched 17,000 level because of higher foreign institutional investment (FII) inflows. Unfortunately, FIIs, banks and non-resident Indians are not allowed in commodities market. Without big players, investors cannot see the real depth and action that they have been seeing on Sensex,” the NCDEX Chairman said.
Brokerage firm Religare’s commodities head Jayant Manglik said this relatively new market has a potential to grow like stock exchanges.
“In 2006-07, volumes grew over 25% to Rs 27,39,340 crore, while BSE and NSE together contributed about Rs 28,00,000 crore. The five-year old commodities market is capable of toppling these figures in the years to come,” he added.
"The market is definitely going to attract many investors in future and opportunities that exist in BSE and NSE are also available in this new market,“ Ravikumar said.
Highlighting the benefits of commodities compared to stocks, brokerage firm SMC Comex’s MD D K Aggarwal said equities are more volatile than commodities.
“Stocks can go from zero to hundred and back again to zero. Commodities being daily consumption goods are sensitive to price volatility,” he added.
Commodity market trends last longer due to basic nature of product cycle as everyday a mine cannot be found and the agriculture land cannot really double, Aggarwal said.
“There are more trading days and hours in commodities. It is traded on Saturdays also and give investors extra hedge.”
Religare’s Manglik said that investing in commodities like gold has been giving good return and stock investors have not looked into this aspect at all.
“They have not calculated the advantages of investing in commodities over equities. It is high time they take a look at the new market,” Manglik said.
However, there are some hurdles impeding the growth potential of this market.
“We are waiting for the government’s approval in areas like opening of option trading, entry of FIIs and banks besides giving more power to the regulator Forward Markets Commission so that it is able to perform like the Securities and Exchange Board of India (SEBI),” National Institute of Commodity Markets & Research CEO Sanjay Kaul said.
Even the renowned investment guru Jim Rogers once said: “If stocks, bonds and commodities were part of the same family, commodities would be the sibling who never measured up -- the black sheep. Commodities have never got due respect and it is been something of a mystery to me why.”