The recent fall in the stock markets, coupled with the rise in prices of precious metals including gold and silver, has attracted retail participation in commodity exchanges.
According to Kunal Shah, head, commodity research, Nirmal Bang Securities Ltd, retail participation, particularly from Tier II and III towns, in commodities has witnessed a sharp increase over the last two years.
Futures bet
“Investors from Tier II and III towns are betting big on futures (gold and silver) traded on commodity exchanges. Lack of understanding of the equity market and high volatility in the recent past have been some reasons for the rising interest in commodities,” Shah told
Futures trading in gold and silver are offered by bourses like MCX, NCDEX, ICEX and NMCE. “These exchanges have witnessed 10-15 per cent growth in volumes during last year. We expect volume growth to be more than 15 per cent during the next one-to-two years,” he said.
Choke points
Despite the healthy growth during last two-to-three years, the Indian commodities market was still at a nascent stage. The industry would require some major reforms in the form of introduction of GST and launch of more products to develop the market, he said.
“Amendment and imposition of GST will lead to the development of spot market as this (GST) will lead to uniformity in tax structure. A well developed spot market will help investors hedge themselves from unwarranted and unjustified speculation,” he said.
“There is also a need to introduce instruments like options and swaps which will give liquidity and more number of options to investors,” he added.
Commodity camp
Lack of awareness is also one of the reasons for the subdued interest in the commodities market.
To increase awareness, Nirmal Bang has been organising a series of commodity camps - “Beyond Mandi” - across India.
“The commodity market is growing at a good rate but lesser number of investors is entering the markets owing to apprehensions and lack of proper guidance. Beyond Mandi is an initiative in investor education to bridge the gap between experts and investors,” he said.