Commodity Exchanges And Futures Trading In India

Abstract:
Commodity trading and futures trading in India is gaining momentum with every passing day even though the pace may be slow. Nevertheless, the futures markets have a bright prospective and is reckoned to help the country’s economy grow.
The results are expected to show more rapidly if the farmers are allowed to avail of the benefits too. There are certain limitations, which prevent them from accessing the futures markets though.Commodity exchanges and futures trading in India is anticipated to make a tremendous contribution to the growing economy.

The Indian commodity markets are gradually growing and it is sure to help the country to absorb the effects of globalization. The growth is comparatively slow though.
A survey conducted on commodity exchanges and futures trading show that in the year 2006 the turnover was Rs 34.4 lac crore as compared to Rs 36.54 lac crore in the year 2007. There was a slight increase. Just a year back (2007), the Indian government had banned commodity trading of rice as well as wheat. It is unlikely that the two futures commodity will start trading too soon.
During the period 2005 to 2006, commodity exchanges and futures trading had geared up considerably. Currently, the main products making up the turnover comprises natural gas, spices and crude oil. As far as commodity exchanges are concerned turnover plays a vital role as it makes up the bulk of the revenue earned by the commodity exchanges.
Commodity trading and farmers in India:
The commodity market regulator Forward Markets Commission has put in all efforts to impart knowledge about the importance of futures trading to the farmers. They have also been educated about the importance of futures value in price risk management as well as hedging. But to ones dismay, the same has not yet been imbibed by the agricultural workers. Studies reveal that even though the farmers are the ones who are most susceptible to volatility existing in the markets and various risks associated with it, their financial status would have improved had they been able to access the commodity markets.
Factors which prohibit farmers from accessing the markets:
There are few factors, which do not allow the farmers to access the system of futures trading in India. They are as follows: * Membership fee is high * Daily margining * Lot size is large. The commodity indices of India as compared to commodity indices in the global markets is low. It was observed that the MCX or Multi Commodity Exchange for the FY2007 increased by 8%. On the contrary, Dow Jones Commodity Index increased by 11% during the same period.

Commodity exchanges and futures trading activities are governed by FMC or Forward Markets Commission.

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Last Updated on : 27th June 2013

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