Commodity Futures Turnover to Top 100 Trillion Rupees, Regulator Predicts

Turnover on commodity exchanges in India, the top gold user and the second-largest wheat and rice grower, may jump more than 28 percent as sugar futures trading resumes and new bourses start up, the industry regulator said.

Trading value may exceed 100 trillion rupees ($2.1 trillion) in the year to March 31, from 77.65 trillion rupees a year ago, B.C. Khatua, chairman of the Forward Markets Commission, said in an interview in Mumbai yesterday.

The Indian Commodity Exchange Ltd., founded by Indiabulls Financial Services Ltd. and state-run MMTC Ltd., will complete its first full year of trading and ACE Derivatives & Commodity Exchange Ltd., the fifth national bourse, will begin operations next month, Khatua said. Turnover on Indian commodity bourses has surged 120 times after electronic trading was introduced in 2003, according to the regulator.

“The perceived utility of the futures market is growing, so there will be more and more people coming to the market to hedge their requirements,” Khatua said.

Commodities worth 38 trillion rupees changed hands from April 1 to Aug. 15, an increase of 56 percent from a year ago, the commission said last week.

“The natural growth of the markets and some commodity prices have gone up” impacting the turnover, Khatua said.

The Forward Markets Commission is studying a proposal by the Indian Commodity Exchange to take billionaire Anil Ambani’s group company as an anchor investor, Khatua said. The plan will be referred to the government for approval because Indiabulls is exiting before the end of a three-year lock-in period, Khatua said. The exchange began in November.

Indiabulls will sell a 26 percent stake to Reliance ADAG, paring its holding to 14 percent, the exchange’s Chief Executive Officer Sanjay Chandel said in an interview on Aug. 27.

Sugar Supplies

The government may lift the ban on trading sugar futures next month, Farm Minister Sharad Pawar told reporters Aug. 19. The restriction, imposed in May last year to keep prices from rising because of a shortage, was extended in December until Sept. 30 this year.

The nation’s sugar output may be 25.5 million tons in the year starting Oct. 1, more than the annual demand of 23 million tons, the Indian Sugar Mills Association said last month.

“Going by the current trend of production, the price trend and the overall global supply situation, my opinion is that the suspension need not to continue. We can restore it in October,” Khatua said. “This contract was very liquid before suspension. It was very active in terms of delivery as well.”

To contact the reporter on this story: Madelene Pearson in Mumbai on mpearson1@bloomberg.net

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