Growth In Indian Commodity Market (1)

1
Growth In Indian Commodity Market
2
Why Commodity Exchange in India

• 47 of GDP is Commodity related
• 23 of GDP is from Agriculture
• Over 65 of 1 trillion population depend on
  agriculture directly
• Over 7500 physical market yards with best Silver
  MCX tips
• History of more than 150 years of derivatives
  trading

3
Why Commodity Exchange in India

• Largest producer / consumer of
• Bullion
• Oilseeds
• Pulses
• Sugar
• Cotton
• Spices
• Economy growing at the rate of 8

4
Evolution of Commodity markets in India

• Ban in forward trading from mid-sixties
• Prior to ban
• Thriving commodity exchanges for cotton, gold,
  edible oils etc.
• more than 20 regional commodity specific
  exchanges
• Recent developments
• Ban completely lifted in 2003
• Emergence of national level de-mutualised online
  multi-commodity exchanges
• 3 National and 21 regional exchanges
• Trade in 60 commodities compared with just 8 in
  2000
• Growth exceeds 4 times in FY05 over FY04

Traded volume in 2004-05 around 20 of Indias GDP
5
Growth in volumes of Indian Commodity Exchanges
Rs bn
1 USD Rs 43
Impressive growth of 341 between 2003-04 to
2004-05
6
Choice of Product Calculator

• Parameters considered
• Price volatility
• Share in GDP
• Correlation with global markets
• Share in external trade
• Government intervention
• Warehousing facilities
• Traders distribution
• Geographical spread
• Number of varieties

Only Physical commodities allowed in Commodity
Exchanges
7
Contract Specifications

• Rigorous Product Research
• Linking entire value chain
• Underlying specifications identification
• Proxies- Benchmarking to all other varieties
• Identification of location basis
• Location premium discount
• Grade premium discount

8
Challenges ahead

• From open outcry to online
• Discipline trading environment
• Nuances of Physical settlement
• Educating about free commodity tips
• To bring actual users on the exchange platform
• Farmers
• Corporate
• Investors

9
Generating liquidity

• Involvement of all value-chain entities in
  contract formulation
• Relationship group provides relentless momentum
• Generates interests of all members clients
• Awareness Programmes
• Wide media coverage
• Easy access to Exchange information
• Market to be opened up for banks, fund houses and
  Foreign Investors

10
Foreign Access

• Foreign access permitted in securities market-
  equities bonds
• Foreign investment regulation for investment in
  commodity derivatives a committee constituted
  by the regulator
• Currently can access by setting up a domestic
  entity for broking investment

11
Options trading

• Options allowed in securities market
• Single Stock options
• Index Options
• Interest rate Options
• Currency Options
• Options not yet permitted in the commodity
  markets
• Law to be amended shortly
• Informal options trading prevalent

12
Regulatory Environment

• Separate regulator for capital markets
  commodity markets
• Capital Markets
• Securities Exchange Board of India (SEBI)
• Autonomous body
• Under Ministry of Finance
• Commodity Markets
• Forward Markets Commission (FMC)
• Part of Ministry of Consumer Affairs
• Law being amended to make it autonomous body

13
About NCDEX
14
NCDEX Current shareholders
15
12
15
12
8
15
15
8
15
Product Calendar
Apr-Dec 2004
Jan Jun 2005
In pipeline
Dec 2003
Gold, Silver, Crude Palm oil, RBD Palmolein,
Cotton, Mustard seed, Mustard oil Soybean,
Refined soy oil


Guar seed, Jute sacking, Chana, Rubber, Pepper,
Wheat, Castor seed, Guar gum, Raw jute, Urad,
Yellow peas, Sugar, Turmeric, Soymeal
Gur, Rice, Maize, Raw silk, Cocoon, Jeera,
Chilli, Steel, Cashew, Cottonseed oilcake, Sesame
seed, Tur, Arabica Robusta Coffee, Copper
Cathode
Other base Metals, Energy Products, More
Agricultural products
Indices- NCDEXAGRI FUTEXAGRI NCDEXRAIN
Each product is selected after an in-depth
research market feedback
16
Average daily volumes
Rs mn
Peak Volume for a single day Rs. 47200 mn on Jul
05
Impressive growth of NCDEX with 85 volume
contribution from agriculture Volumes in Steel
Copper picking up- daily average steel trade-
10,000 tonnes