Apples, freight, and weather, coming soon to a derivatives contract near you
MUMBAI : Apples, cashews or the weather? You may soon be able to trade on the prices of these and several more on an exchange platform, with the finance ministry expanding the list of commodity derivatives that can be offered on national stock exchanges. The finance ministry has notified 13 new commodities for derivatives trading, including manganese, freight (road, shipping and airways), weather, cement, bitumen, apple, cashew, garlic, skimmed milk powder, white butter, timber, bamboo and palladium.
The move aims to provide a more diversified price risk management mechanism to Indian companies and other participants. Recognized national stock exchanges such as MCX, NSE, NCDEX and BSE will need to submit contract plans for approval with Sebi before they can launch derivatives trading in these new commodities.
Commodity market analysts said if India is to become a manufacturing superpower, domestic companies need to be able to effectively hedge their price risk on platforms offered by domestic exchanges to become a global price influencer. “The entire infrastructure for hedging—a nationalized platform where actual users can efficiently cover their price risk and become price influencers like China, for industrial metals, for example and funds to take contra calls —should be put in place," said Kishore Narne, director, Motilal Oswal Financial Services.
“If India is to become a manufacturing superpower, this is imperative and the expansion of the list is a step in that direction." The latest notification dated 1 March, which Mint has reviewed, takes the total number of commodity derivatives to 104. Commodity derivatives hedging enables a company to protect itself from fluctuations in input or final product prices by locking
. Read more on livemint.com
