Date:29/04/2005 URL: http://www.thehindubusinessline.com/2005/04/29/stories/2005042901411200.htm

Back Futures trading volumes up despite timing curbs

Dhimant Bhatt

Mumbai , April 28

THE daily futures trading volumes of two major multi-commodities exchanges in the country - National Commodity and Derivative Exchange Ltd (NCDEX) and Multi-Commodity Exchange (MCX) - have shown a significant increase in the last three days.This is despite shortening in timing of agricultural commodities as ordered by the Forward Market Commission.

At NCDEX, daily trading volume of all commodities, increased to Rs 2,116 crore (one-way) on Thursday, as against Monday's Rs 1,655 crore.

Trading volumes were Rs 1,661 crore on Tuesday and Rs 1,882 crore on Wednesday.

Similarly, daily trading volume of all commodities on MCX also increased to Rs 1,552 crore on Wednesday, as against Monday's Rs 763.42 crore.

Trading volume recorded on Tuesday was Rs 991.76 crore. In compliance with the direction of the Forward Markets Commission (FMC), both the exchanges revised their timing of all agricultural commodities from 10 a.m. to 5 p.m. on weekdays with effect from Monday (April 25) and 10 a.m. to 11 p.m. for international commodities such as bullion, metals (ferrous/non-ferrous) and crude oil.

"Now with the reduction in timing of agricultural commodities, it is seen that the markets in agricultural commodities are relatively more stable and the traders in the evening are focusing on international commodities, where price movements is based more on fundamentals than sentiments," Mr Joseph Massey, Deputy Managing Director, MCX, told Business Line.

MCX's average daily volume was Rs 1,180.60 crore in April. Turnover has increased to Rs 1,552.14 crore as on Wednesday, higher by 31.50 per cent. Similarly, average daily volume of NCDEX was Rs 1,631 crore during the first four-month period (January 1-April 9).

Mr Madan Sabnavis, Chief Economist, NCDEX, said: "We are watching the trading volume movement as the new timing has been implemented from Monday. In fact, trading volumes have crossed Rs 2,000-crore mark today, the highest this week".

After the closure of evening trading in agricultural commodities, turnover in international commodities had increased, a local broker said.

The brokers are now focusing more on trading in commodities, which have strong fundamentals and can be tracked using technical analysis. The reduction of trading time in agricultural commodities has reduced the volatility in the market during night and therefore the members are now being able to focus more on fundamentally strong commodities.

In some of the narrow agricultural commodities, prices were witnessing very large volatility during the evening session when the physical market were closed and there were no benchmark rates available during that time for such commodities.

This volatility during the night used to impact the prices in the physical and futures market the next day also, trade sources said.

Therefore, some agricultural commodities witnessed very high volatility during the entire day, which attracted speculators but adversely impacted the actual hedgers.