NCDEX wants more interest in soya, wheat

Commodity bourse NCDEX will focus on increasing participation on derivatives contracts such as soyabean, wheat and maize to raise its turnover and financial strength, the bourse’s CEO Vijay Kumar told ET. The exchange is engaging with traders, processors and banks, which lend to the former, to underscore the need to hedge their price risk.
The exchange’s daily turnover has averaged Rs 2,155 crore in the fiscal year through Jan 4, 4 per cent below that in the same period of FY18, which has many stakeholders concerned. One of the reasons for this is the low open interest (OI) to crop production in key items like wheat, maize and soyabean derivatives.

For example, in mature contracts such as guarseed, guargum, castor and coriander derivatives, the OI to production ratio ranged between 10 per cent and 28 per cent in the fiscal year through December-end. That of soyabean was just 1.5 per cent, maize (0.02 per cent) and wheat (0.004 per cent).

Kumar said the exchange was trying to increase the ratio in broad commodities. Through awareness programmes it was engaging with traders and processors on the need to hedge themselves from price volatility. A processor or a trader who holds the underlying commodity would have to sell the derivatives of the same on a futures exchange – this through selling a futures contract or buying a put option.If the price rose, the loss on the exchange would be offset by the gain on the physical market where the constituents sell their underlying produce. If the price fell, the gain on the futures market would offset the physical market loss.

“Right now, many of the traders, processors in commodities like wheat and edible oilseeds don’t hedge and when prices fall, face huge losses as observed during periods of food disinflation,” said Kumar. “Even banks, who give them loans, are being engaged to urge the value chain intermediaries to hedge themselves on exchanges to protect their assets from turning NPAs.Once these constituents come on to the exchange, volumes will rise and that is one of our key priorities – to increase participation.”

 

 

 

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