Mumbai: Concerned over “interference” in trading of agricultural goods, the National Commodity & Derivatives Exchange Ltd (NCDEX) has said that it was looking at metal and bullion futures as a major thrust area for future growth.
“Though agri-commodities accounted for 85% of our total business, we will move to metals and bullion,” NCDEX managing director and CEO P.H. Ravikumar said.
“There is less interference in non-agricultural commodities,” he said, adding that gold would be one of the thrust areas. Like Gold ETFs (exchange traded funds), NCDEX would enable its customers to hold the yellow metal in demat form. NCDEX has 600-800kg of gold and it may offer 100g of mini-gold contracts.
Ravikumar said that while the margin in copper was only 7%, in jeera it was 31%, making it unviable for small and medium-sized players.
On the government’s decision to ban futures trading in wheat and pulses last year as a measure to curb inflation, Ravikumar said, “We have been proved right that inflation has nothing to do with commodity futures.”
“The ban on futures trading in wheat has not helped, as wheat and pulses prices have continued to remain firm and they have actually gone exactly the way our future prices predicted,” he added.
“As we don’t control spot prices, so the spot prices exactly moved in the way of futures prices,” the NCDEX chief said, adding that futures trading would bring down volatility of prices in the spot market. Asked if he expected the ban to be lifted with inflation falling now, he said the Abhijit Sen committee set up to go into the link of commodity futures with rising prices was expected to submit its report next month. The government would take a decision on the issue thereafter.
NCDEX has launched an awareness campaign on the benefits of commodity trading that is aimed at policymakers and politicians, who blamed futures trading in farm goods for the spurt in prices.
Admitting that speculation was involved in futures trading, Ravikumar said it helped in price discovery. “Prices on commodity exchanges reflected the fundamentals of demand and supply. Price discovery on an exchange like NCDEX not only helped farmers to take a decision on when to sell their produce, but also the crop to grow in the next season,” he said.
“We are working with (the regulator, Forward Markets Commission) FMC to bring grass roots level participation. We need to provide infrastructure like warehousing and graining and we continue to roll-out those facilities,” Ravikumar said, adding that it will set up 1,500 warehouses in the next two years.