The commodity derivatives market is enthused by the strong regulatory
measures that reduced volatility in agri-commodities to an average of
less than one per cent from almost four per cent daily in early 2012. The
market hopes the FCRA (Amendment) Bill will revolutionalise commodity
futures trading this year
1..Gold import duty up
four times
The government doubled the
import duty on gold to 2 per
cent in January and to 4 per
cent in March, resulting in gold becoming
costlier. Experts fear this would increase gold
smuggling and lead to a fall of about 50 per
cent in imports through the official channel.
2..Record high agri prices
Many agri-commodities sawa surge in prices
on the back of deficient rains in India and a
drought in the US. Initially,
deficient rains not only lowered
sowing, but also hampered the
kharif crop yield, which raised
prices. The drought in the US
worsened the situation
3 Guar futures ban
Prices of guar seeds went up dramatically—
from ~4,000 a quintal in November 2011 to
~30,000 in March 2012. The excess volatility and
a fewcases of trading
manipulation prompted the
market regulator to suspend
futures trading in March. This
led to a sharp drop in volumes
during March- June.
4 Sticky cotton
The government banned cotton exports in
March, but soon restored it.
Since China cut cotton
procurement, the Ministry of
Textiles estimates fibre exports
in 2013 to stand at half of last
year’s level.
4 Positive signals from North Block
The finance ministry, for the first time, showed
a positive approach towards the FCRA
(Amendment) Bill which proposes to empower
the Forward Markets Commission. The ministry
incorporated the clause,
allowing banks’ direct
participation in commodity
futures in the Banking Law
(Amendment) Bill. Though it
dropped the clause later, it
resisted the objections raised by Opposition
parties.
EXPECTATIONS IN 2013
1- US fiscal cliff
The looming US fiscal cliff and
protests from Congressmen have
pushed commodity markets into
uncertainty. While the market
awaits its clearance in the first
week of January, the additional fund flow into
the market would support base metals on its
renewed demand from infrastructure projects.
However, its rejection would fuel precious
metals to new highs.
2- Clearance to FCR(A) Bill
After two failed attempts, hopes are still alive
for the clearance of the FCRA
(Amendment) Bill in the Budget
session. Its clearance is
necessary, as FMC, in the
absence of adequate power,
fails to penalise violators of
regulatory norms. The Bill will also allow FMC
to grant approvals for intangible commodity
contracts.
3- WDRA for smooth delivery
The government set up the
Warehousing Development and
Regulatory Authority (WDRA).
But its primary target—making
warehouse receipts (WRs)
tradable—is yet to be met. Though the final
guidelines in this regard are yet to be framed,
the listing of WRs is possible in 2013, which
would revolutionalise the entire commodity
sector in India.
4-Another exchange
The Ministry of Consumer Affairs
has cleared the decks for
Universal Commodity Exchange,
India’s sixth national level
commodity derivatives
platform. The exchange is set to
be flagged off in 2013 to benefit arbitrage
opportunity for traders on yet another
commodity exchange.
5-Advisory sub-committee
The Ministry of Consumer Affairs set up a 40-
member advisory committee, headed by FMC
chief Ramesh Abhishek, to study
the measures to improve
commodity markets. The panel
had set up a sub-committee to
apprise it of the problems faced
by trade. The sub-committee is expected to
become functional soon.
Enthused commodity market
awaits a ‘revolution’
measures that reduced volatility in agri-commodities to an average of
less than one per cent from almost four per cent daily in early 2012. The
market hopes the FCRA (Amendment) Bill will revolutionalise commodity
futures trading this year
1..Gold import duty up
four times
The government doubled the
import duty on gold to 2 per
cent in January and to 4 per
cent in March, resulting in gold becoming
costlier. Experts fear this would increase gold
smuggling and lead to a fall of about 50 per
cent in imports through the official channel.
2..Record high agri prices
Many agri-commodities sawa surge in prices
on the back of deficient rains in India and a
drought in the US. Initially,
deficient rains not only lowered
sowing, but also hampered the
kharif crop yield, which raised
prices. The drought in the US
worsened the situation
3 Guar futures ban
Prices of guar seeds went up dramatically—
from ~4,000 a quintal in November 2011 to
~30,000 in March 2012. The excess volatility and
a fewcases of trading
manipulation prompted the
market regulator to suspend
futures trading in March. This
led to a sharp drop in volumes
during March- June.
4 Sticky cotton
The government banned cotton exports in
March, but soon restored it.
Since China cut cotton
procurement, the Ministry of
Textiles estimates fibre exports
in 2013 to stand at half of last
year’s level.
4 Positive signals from North Block
The finance ministry, for the first time, showed
a positive approach towards the FCRA
(Amendment) Bill which proposes to empower
the Forward Markets Commission. The ministry
incorporated the clause,
allowing banks’ direct
participation in commodity
futures in the Banking Law
(Amendment) Bill. Though it
dropped the clause later, it
resisted the objections raised by Opposition
parties.
EXPECTATIONS IN 2013
1- US fiscal cliff
The looming US fiscal cliff and
protests from Congressmen have
pushed commodity markets into
uncertainty. While the market
awaits its clearance in the first
week of January, the additional fund flow into
the market would support base metals on its
renewed demand from infrastructure projects.
However, its rejection would fuel precious
metals to new highs.
2- Clearance to FCR(A) Bill
After two failed attempts, hopes are still alive
for the clearance of the FCRA
(Amendment) Bill in the Budget
session. Its clearance is
necessary, as FMC, in the
absence of adequate power,
fails to penalise violators of
regulatory norms. The Bill will also allow FMC
to grant approvals for intangible commodity
contracts.
3- WDRA for smooth delivery
The government set up the
Warehousing Development and
Regulatory Authority (WDRA).
But its primary target—making
warehouse receipts (WRs)
tradable—is yet to be met. Though the final
guidelines in this regard are yet to be framed,
the listing of WRs is possible in 2013, which
would revolutionalise the entire commodity
sector in India.
4-Another exchange
The Ministry of Consumer Affairs
has cleared the decks for
Universal Commodity Exchange,
India’s sixth national level
commodity derivatives
platform. The exchange is set to
be flagged off in 2013 to benefit arbitrage
opportunity for traders on yet another
commodity exchange.
5-Advisory sub-committee
The Ministry of Consumer Affairs set up a 40-
member advisory committee, headed by FMC
chief Ramesh Abhishek, to study
the measures to improve
commodity markets. The panel
had set up a sub-committee to
apprise it of the problems faced
by trade. The sub-committee is expected to
become functional soon.
Enthused commodity market
awaits a ‘revolution’
No comments:
Post a Comment