Commodity exchanges have been showing a gradual improvement in their performance. Though both the large commodity exchanges, MCX and NCDEX saw a drop in turnover during April-May when the pandemic was at its peak, the average daily turnover (ADTV) numbers have since shown a steady improvement and are now edging close to pre-Covid levels.

At MCX, the ADTV in October was recorded at ₹33,009 crore, up from a low of ₹15,658 crore in April; in NCDEX, it was ₹1,514 crore in October, as compared to ₹588 crore in May.

On reasons for jump in turnover, Ravindra Rao, VP- Head Commodity Research at Kotak Securities, said, “It is mainly due to more people staying at home because of the pandemic. They have used capital market as a passive income source. In the last few months, there has been a jump in the number of new accounts opened in equities, so I think the same would be the case with commodities too.”

He added, “Another reason for turnover going up is the introduction of new products in both the exchanges that include index futures and options in futures and option in goods. Also, allowing more participants like AIF category III and Mutual funds has increased participation to some extent…”

Commodities that drove turnover at MCX were base metals and bullion. The ADTV in base metals was recorded ₹6,962 crore in October, nearly three times higher than the ₹2,419 crore recorded in April.

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Chittaranjan Rege, Head Metals, MCX, said, “With almost no offtake of metals in the physical market during the early months of the lockdown, the exchange acted as the delivery of last resort for market participants saddled with inventories either at ports or their warehouses. The exchange saw a fair amount of deliveries coming in as well as move out of the warehouses especially during March-June period when lockdown restrictions were fairly high.”

In bullion too, volumes have been going up at MCX. In October, the ADTV was ₹16,804 crore vis-à-vis ₹7,905 crore recorded in April. In energy, it was ₹8906 crore as against ₹5,090 crore recorded in April.

At NCDEX, the growth was driven by chana, soy bean and soy oil, RM seed and guar seed. In Chana, the ADTV was ₹65 crore in April. This improved to ₹272 crore in October. In Soybean, it improved from ₹88 crore in May to ₹291 crore in October.

Rising food prices

In the three-month period from August to October, returns delivered by Agridex (13.7 per cent), the agri commodity index futures (that tracks top 10 agri contracts), is almost three times the return of Sensex and Nifty futures (5 per cent). Ajay Kedia, Director, Kedia Commodities, attributes higher agri-commodity prices to rising food prices in global markets due to weather-induced crop damage and supply chain disruptions.

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