CPAI seeks stable policy to harness potential of 2 lakh crore daily agricultural contract trading market
The Commodity Participants Association of India (CPAI), a leading industry body representing thousands of participants in the commodity futures value chain, has organized a convention to commemorate the 75th anniversary of India’s independence. India and the progress made so far in the commodity and capital markets.
The convention titled “Accelerating Growth Through Commodities and Capital Market @75” highlighted the size of India’s physical agricultural commodities market which is far larger than the underlying futures markets. The potential that exists today is as high as 2 lakh crore derivative contracts per day for which a stable political environment would be key.
Stable government policy on agricultural contracts will give confidence to value chain actors for effective price discovery and hedging. Speaking on the occasion, Narinder Wadhwa, Chairman of CPAI and Founder and Managing Director of SKI Group, said: “We need to focus on the 3Ps – policy, products and participants – that will enable us to accelerate our growth through commodity and capital markets. Moreover, the cost of transactions must be reduced to accelerate global and domestic investments in Indian stock exchanges.
VS Sundresan, Executive Director, SEBI, emphasized the need for 3 ‘I’s – issuer, intermediary and investor and raised concerns about mis-selling, non-disclosure of investors, complexity of products, lack of depth on Indian stock markets which results in greed and possibly bad practice.
India’s derivatives markets have made leaps and bounds over the past 75 years, with stocks and commodities currently being traded on a one-stop-shop exchange, indicating the inclusiveness of the financial market . There has been a sharp increase in the number of Demat account holders.
In addition to allowing some mutual fund participation in commodity futures, the government has also expanded the product basket to increase participation.
Ashok Kumar Agarwal, President and Promoter of Globe Capital Market Limited and Chief Mentor of CPAI, added: “The sustained increase in the number of demat accounts increases inclusiveness in financial markets. It also imposes an additional responsibility on intermediaries to take more initiative in conveying investor education to ensure buy-in and avoid disillusionment.
In recent years, commodity and equity market volatility has increased due to climate change, geopolitical challenges and global economic policies. Therefore, there is a need to improve fair price discovery across the entire value chain on the exchange platform.
Arun Raste, MD and CEO, NCDEX, said: “Price discovery needs to be fair across the value chain. Previously, the biggest hedgers in Indonesia were inspired by the prices of soybeans and derivatives in India to set prices. The stability of agricultural contracts will give confidence to value chain actors in the usefulness of agricultural derivatives for effective price discovery and hedging.
PS Reddy – CEO and MD, MCX, stressed the need to conduct a study to determine if trade in a particular product is harmful before banning it. “MCX has accelerated the process of building national refined brands to increase the participation of domestic consumers and gold refiners”, he added.
In fact, the gift city of Gujarat fulfills the aspiration of the IFSC becoming a gateway for global capital flows, with some of the instruments traded here becoming the largest in the world. The city of the gift has many such opportunities. A gold exchange here can make IFSC the gateway for importing gold into India if price discovery is better on the exchange than on the OTC market.
Vikram Limaye, CEO and Managing Director of the National Stock Exchange, “Prices are moving from Europe to Asia, and Asia’s ability to set the price is improving. NSE multiplies its steps in raw materials. It is a strategic partner of the Indian Gas Exchange that facilitates trading in delivery-based exchanges at designated physical hubs and also partners with IBJA for a spot bullion exchange.
Going forward, Make in India, Start-Up Mission which created 100 unicorns, Digital India with the adoption of DLT and Blockchain, etc. will accelerate growth and open up new opportunities in the commodity and capital markets.
First published on: Jun 09, 2022, 08:27 IST