Growth of Commodity Market

Growth of Commodity Market

commodity market

The most essiential factor of the financial markets of any country is its commodity market. 

Metals, base metals, crude oil, energy and soft commodities like palm oil, coffee etc. are traded in the market. 

It is necessary to create an active and energetic maket. This would help investors to cover their commodity risk, take speculations and to profit from unequal prices. 

The agricultural sector grants maximum growth towards GDP in India. India has more possibiity to become a major center for trading of more commodities. 

However, there is intervention of government in agricultural market in maintaining buffer stock, in fixing the prices and by way of imposing restrictions on export and import of the commodities.

There is a desperate need of developed commodity derivative market in India to safe guard the farmers by fixing fair prices and maintain buffer stocks. 

The present study analyses the growth and challenges of the commodity market in India.

With the help of modern technology, The National Exchanges, have enabled the facility of commodity futures trading across the country. 

The total trade value of trade:

2011 – 12: 181.26 lakh crore

2010 – 11: 119.49 lakh crore

2009 – 10: 77.65   lakh crore

The major commodities traded at the exchanges were Bullion, base metals, energy products and agricultural commodities. 

The outstanding commodities were gold, silver, copper, lead, Nickel, zinc, chana, soy oil, guar seed and crude oil. 

Various awareness and capacity building programmes, implementation of the Price Dissemination Project at APMCMandis were held by the Forward Commission amongst stake holders as the focus was on the regulation of futures trading in commodities. 

The focus of the commission in the upcoming years: 

1.       Consolidate the market

2.       Strengthen regulation

3.       Generate confidence amongst the participants

4.       Keep the market free from manipulation

5.       Increase awareness among the stakeholders

6.       Empower the farmers with price information

7.       Encourage and facilitate intermediaries such as aggregators to facilitate the participation of farmers in the market for hedging.

The below exchanges contributed 99.84% of the total value among twenty-one recognized exchanges. 

Multi Commodity Exchange (MCX), Mumbai, National Commodity and Derivatives Exchange (NCDEX), Mumbai, National Multi Commodities Exchange, (NMCE), Ahmedabad, Indian Commodity Exchange, Ltd., Gurgaon, ACE Derivatives and Commodity Exchange, Ahmedabad, National Board of Trade (NBOT), Indore.

Although the futures trading in a few agricultural commodities were suspended, the Indian Commodity Futures Markets continued to grow. 

113 commodities were regulated under the auspices of the recognized Exchanges during this period. 

21 recognized exchanges were functioning during 2011-12. 

The outstanding traded commodities among 113 regulated by FMC were Silver, Gold, Copper, Nickel, Zinc, Lead, Soy Oil, Guarseed, Chana, Pepper, and Jeera.  

Name of the Exchanges Value of the Recognised Exchanges
2009-10 in Cr. 2010-11 in Cr. 2011-12 in Cr.
MCX 63,93,302.17(82.34) 98,41,502.90(82.36) 155,97,095.47(86.05)
NCDEX, Mumbai 9,17,584.71(11.82) 14,10,602.21(11.81) 18,10,210.1(9.99)/td>
NMCE, Ahmadabad 2,27,901.48(2.94) 2,18,410.90(1.83) 2,68,350.95(1.48)
ICEX, Gorgons 1,36,425.36(1.78) 3,77,729.88(3.16) 2,58,105.67(1.47)
ACE, Ahmadabad @ - 30,059.63(0.25) 1,38,657.61(0.76)
NBOT, Indore 60,449.52(0.78) 51,662.06(0.43) NA
Total Exchanges 77,35,663.24(99.64) 1,19,29,967.58(99.84) 1,80,72,419.8(99.70)
Others 29,090.81(0.36) 18,974.77(0.84) 53687.0(0.30)
Grand Total 7,76,475.050100 1,19,48,942.35100 1,81,26,106.80(100)

The share of various exchanges in the total value of trade from the year 2009-2012 is clearly depicted. 

There was an increase from Rs. 7,76,475.05 crores to Rs.1,81,12,6106.8 crores in the total value of trade in commodity exchanges. 

The MCX commodity exchange traded 82.34 per cent of the value and increased its share to 86.34 per cent of the value by the year 2011-12.

It was noted that there was decrease in the NMCE’s share value of total commodities traded from 2.94 per cent to1.48 per cent from 2009 to 2012.

There was a decrease in the NCDEX commodity exchange share value of trade from 11.82 to 9.99 percent by 20011-2012. 

Both in trade volume and its trade value, the MCX is the major contributor in commodity market. 

Tables 4 & 5 depict:

From 2009-2012, the trade has increased over the years in absolute terms. 

The share in total value decreased in some of the metals like Lead and Nickel. 

The growth is not in considerable amount although commodities like Silver, Gold, Crude oil, Copper and other commodities increased. 

By 2011-12, the value of commodities traded in MCX commodity market increased from 17.86 crores to 36.79crores.

By 2010-11, the value of gold to total value decreased from 30.07 crores to 25.09 and then increased to 27.09 crores. 

The value of Crude oil decreased continuously.

From 2009-10 to 2011-12, the percentage share of Silver in total value of commodities traded in MCX market increased from 17.86 per cent to 36.79 percent. 

From 2009-10 to 2010-11, the per cent value of Gold to total value of commodities traded to total commodity decreased from 30.07 to 25.09 percent and increased to 27.09 by 2011-12. 

From the year 2009-1- to 2011-12, the per cent value of Crude Oil decreased from19.07 per cent to 15.79 per cent. 

From the year 2010-11, Lead was introduced as commodity. 

Zink was not traded during the year 2011-12 in MCX Market.