Volume : 8, Issue : 12, December - 2019

REVVING UP THE INDIAN COMMODITY MARKETS

Deepa T M, Dr. Prathima G S

Abstract :

India is one of the largest commodity traders in the world. However, trading volumes through commodity exchanges are ridiculously low. Globally, the size of commodity derivatives market is many times larger than the underlying physical commodity trade. One should appreciate that higher volumes in the derivatives market help minimise the commodity price risks spanning across the markets. With SEBI strengthening exchanges and intermediaries through policy fine-tuning, permitting new entities like mutual funds and portfolio management services (PMS) and permitting new products like options and index trading, the scope of commodity trading in the country is set to improve significantly. However, much more needs to be done to rev up the market. The researcher’s interaction with three respondent categories associated with the market, namely hedgers, arbitrageurs and speculators led the researcher to conclude that levies like CTT had placed the domestic market at a disadvantage. Even today, speculators and HNIs alone are conspicuous in the market to the exclusion of other categories and this has to change. The physical market should to be reformed so it could move in perfect lockstep with the derivatives market. The onerous regulatory regime should be replaced by a light-touch regulatory regime. More importantly, the LTCG regime should be reviewed since it comes in the way of long-term investment flowing into the market. The two regulators, namely SEBI and RBI are not on the same page vis-à-vis certain issues like permitting banks to participate in the market . This is unfortunate and has to change.