Corporate houses are adding sheen to the domestic commodity exchanges now.
As a result, trading volumes on commodity exchanges are rising. The entry of giant corporates from across all sectors, especially in global commodities such as base metals, precious metals, steel and energy, is proving to be the driving force of exchanges now.
Corporates contributed enormously to the volume and turnover growth in Indian commodity exchanges, which have together recorded a 41 per cent turnover growth at Rs 1,64,920.40 crore (Rs 1649.2 billion) in the second fortnight of July compared with Rs 1,17,028.78 crore (Rs 1170.28 billion) in the previous fortnight.
Corporates form a big part of the physical markets, and as they start increasingly using the National Commodities and Derivatives Exchange platform, the volumes will rise, said an NCDEX official.
An increase in corporate volumes would stabilise prices and help in anchoring the physical markets to the futures market.
For effective price discovery, it was important for speculators, hedgers and arbitrageurs to be present in the market.
The Multi Commodity Exchange cloaks the maximum market share in metal Futures in India, and traders would like to hedge on this platform where the cost is lower because of higher liquidity. Hence, the entry of corporates, especially for metals on the MCX, would help them in better price discovery.
In base metals, players like Binani Zinc has been keen, hedging approximately 2000 tonnes of zinc on the MCX. However, the company does not have any plans to hedge on the NCDEX.
Reportedly, Binani Zinc, the second-largest zinc producer in the country after Hindustan Zinc, has traded to the value of Rs 1,500 crore (Rs 15 billion) and booked a profit of Rs 150 crore (Rs 1.5 billion) since it started hedging on the MCX last year.
Other players that are currently hedging on the domestic exchanges include Essar and Polycab Wire, while metal and energy majors, including Hindustan Copper, Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation, are in various stages of negotiations to begin hedging in the near future.
Many corporates hedge on global commodity exchanges, with metal majors trading primarily on the London Metal Exchange and the New York Mercantile Exchange (Nymex), and energy majors on the Intercontinental Exchange.
