COMMODITY MARKET IN INDIA

Indian Commodity Markets 

MCX (Multi Commodity Exchange of India Limited) and the NCDEX (National Commodity & Derivatives Exchange Limited) are the primary commodity trading platforms in India. MCX is a commodity futures exchange started in 2003, and is listed on the BSE. NCDEX is another exchange that is promoted jointly by LIC, NABARD, etc and has a robust online trading system. 

The NCDEX has its own index called the ‘Dhaanya’- Dhaanya is a value weighted index, computed in real time using the prices of the 10 most liquid commodity futures traded on the NCDEX platform. 

The below is a screen shot of the same –            

 Problems with the Indian Commodity Markets 

The Indian markets have been plagued by the ‘speculator’ and ‘fly-by-night’ operators. The Chairman of the now defunct NSEL (National Spot Exchange Limited) had to be arrested for having entered into futures markets without adequate documentation – many commodities that were traded didn’t have any underlying to them. SEBI has passed tough strictures on fresh forward contracts in the commodity markets in Feb 2016, and it has derecognized OTCEI (Over-the- counter exchange of India). 

Another big problem is that the commodity markets have not been able to see the ‘exponential’ growth that is required for platforms to sustain it. The basic problem is of ‘inclusion’ – farmers that form the backbone of agri-based commodities are not able to connect to the market, even though both MCX and NCDEX have created several awareness programs towards the same. 

Political ramifications have also added to the woes – price sensitive commodities like sugar have been on and off the futures platform. 

Way Forward 

Needless to say, the commodity markets in India have a long way to go to becoming globally competent. There is a persisting need to close the chain between farmers to markets, which is even more challenging given that the hold of intermediaries is too strong in Indian scenario. An impetus from the government is also required in order to both educate and popularize the adoption of commodity markets in India. 

Regulatory scenario in India 

In India, the FMC was the chief regulator of commodity futures markets in India, before it got merged with SEBI. The government, considering it wise to bring the commodity market under a common regulator, repealed the Forward Contracts Regulation Act (FCRA) 1952 and the regulation of commodity derivatives market shifted to Securities and Exchange Board of India (SEBI) under Securities Contracts Regulation Act (SCRA) 1956 with effect from 28th September, 2015.