CP Krishnan, Whole Time Director, Geojit Comtrade, tells Rahul Oberoi how spices trading is growing in India.
How is futures trading in spices shaping up in India?Six years ago, during the early stages of
futures trading of spices in India, trading in pepper had a distinctive bias towards Kochi, for rates and delivery. But now, such a bias is less, with the North Indian market becoming quite active.
With online trading giving transparent pricing across the nation, and with availability of more delivery centres, futures trading has less of a regional bias. The proposed Goods and Services Tax (GST) regime, amendment of Agricultural Produce Market Committee (APMC) Act would pave way for more free movement of goods, and lesser price mismatches across different locations in India.
With the futures trading platform, the world's only such platform for spices, India is not just a trendsetter, but it has also taken a big leap towards price transparency and information dissemination.
What are the factors one should track before investing in the spices bag?As spices have a good export market, domestic prices do take cues from variation in demand-supply in the international markets. Other than changes in the rupee against traded currencies, one should also look at the competitiveness of our spices varieties in the international market.
Further, most of the spices have a bigger shelf-life than other commodities traded in the exchange platform. Hence, seasonal spreads between spot and futures market are more uniform.
Do you think people are using commodities more as a hedging tool rather than investment?A good section of our traders use the platform for hedging purposes. If volumes and depth in exchanges improve, it would attract more institutions/traders to use the platform.
Do you think there is enough awareness among retail investors about commodity trading?Unlike in many other investment vehicles, where investors normally forget about their investment and re-enter at their leisure, commodity futures trading requires the trader to be more involved and close to the market.
What are the regulatory changes required to boost trading in commodities, especially in spices?Regarding spices, the limit on open positions or deliverable quantity could be relaxed which would result in more volumes as well as increased hedging activities. Since spices are not essential commodities, FDI may also be considered by the regulator. Participation would also improve if the regulator allows options trading, which would help reduce volatility due to exposure to forex fluctuations.
According to you which new commodities must be added on the bourse for trading?Ginger/dry ginger and white pepper can be added to the current basket.
