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Mumbai: Higher volatility in the prices of agricultural commodities compared to bullion or base metals has come as a blessing for the National Commodity and Derivatives Exchange Ltd (NCDEX), the largest exchange for trading of agricultural commodities.

The share of NCDEX in the combined turnover of the four national-level commodity bourses was a little over 20% in the fortnight ended 31 May, according to data from commodities market regulator Forward Markets Commission (FMC). This is the first time since July last year that NCDEX has seen its share cross the 20% mark. It was between 15% and 17% for most of last year.

Apart from NCDEX, the other national-level commodity exchanges are Multi Commodity Exchange of India Ltd (MCX), National Multi-Commodity Exchange of India Ltd (NMCE) and Ace Derivatives and Commodity Exchange Ltd.

There are half-a-dozen regional commodity exchanges as well, specializing in region-specific commodities. While MCX is the country’s largest commodity bourse with a market share of over 80% on most days, it trails NCDEX in the trading of agri commodities.

MCX registers the bulk of its turnover from base and precious metals along with energy contracts such as natural gas and crude oil.

NCDEX is strong in commodities such as coriander, turmeric, chana, castorseed, soyabean and jeera.

There has been an increased volatility in agricultural commodities since March because of uncertainties around monsoon and the unseasonal rain in Gujarat and Rajasthan, which led to higher trading interest in such commodities, said Kishore Narne, associate director of commodity and currency at Motilal Oswal Commodities Broker Pvt. Ltd.

“Traders love volatility and agri commodities such as pulses, chana, jeera, soyabean and guar, among others, saw a jump in prices based on views related to monsoon. In contrast, the prices of precious metals, including gold, have been range-bound. This has led to a higher turnover on NCDEX," Narne said.

The India Meteorological Department (IMD) has forecast a second consecutive year of deficient rainfall. While monsoon rainfall across the country has been above normal so far, IMD expects rainfall to weaken in July, the peak month during monsoon.

Skymet Weather Services Pvt. Ltd, a private forecaster, however, believes that this year’s monsoon will be normal.

Naveen Mathur, associate director of commodities and currencies at Angel Broking Ltd, said volatility, which has contributed to the increase in turnover of agri commodities, is primarily due to monsoon predictions.

“Investors felt that due to IMD predictions some of the agricultural commodities could see higher volatility and so there was increased trading interest," said Mathur.

According to the fortnightly data disseminated by FMC, prices of chana have risen nearly 31% between January and May. Similarly, prices of jeera and soyabean rose by 18% and 16%, respectively, in the same period. These are some of the top traded commodities on NCDEX.

Meanwhile, crude oil saw a rise of less than 9% between January and May. While gold remained flat, spot prices of copper, nickel, natural gas, lead and aluminium fell in the first five months of 2015.

Responding to an email query, NCDEX said it has focused on the overall development of the commodity ecosystem in the country by introducing smaller-sized contracts to help retail investors diversify their portfolio and has streamlined contracts, responding to market demand, to gain better hedging efficiency.

“These initiatives, along with the reformatory move by FMC to revise norms for daily price limit of commodities, have helped in increased participation in the commodity markets. The recent volatility in prices due to uncertainty about monsoon also contributed to increased turnover," said NCDEX in an emailed response.

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