Currently, MCX’s average daily turnover is around Rs 2 lakh crore, Anuj Gupta, Head of Commodities & Currencies at HDFC Securities, said. He expects about 20-30% gains in commodities due to the shift away from equity derivatives. Gupta noted that since commodity derivatives are available for trading, hedging, and arbitrage, traders can take advantage of the commodity segment.
As an example, he said crude oil options, which he said have a decent volume on the Multi Commodity Exchange of India (MCX) and are popular among traders and high-frequency trading (HFT) players. He said some activity may shift from equities to commodities.
In India, several commodity exchanges serve different niches, including Multi Commodity Exchange of India (MCX), National Commodity and Derivatives Exchange (NCDEX), National Multi Commodity Exchange (NMCE), and Indian Commodity Exchange (ICEX).
Commodities such as gold, crude oil, and agricultural products provide an alternative for traders looking for volatility and speculative opportunities,” said Rahul Ghose, CEO of Hedged.in. , allowing traders to trade natural gas, crude oil, and silver with capital ranging from Rs 10,000 to Rs 25,000. Meanwhile, Trivesh D, COO of Tradejini, anticipates that SEBI’s curbs will impact the expiration day per week, with the expected volume to reduce the regulator has proposed to reduce the number of expirations per week to two per week, one per exchange .Currently, the weekly contract expires on all five trading days of the week.
Analysts expect an increase in trading volume for commodities with the SEBI curve, while there are no significant changes.
Tradejini’s COO also did not anticipate a material impact from the measures, suggesting that traders’ speculative mindset may still persist.
Ghose of Hedged.in notes that the peak trading time for commodities is from 5 to 9 pm, unlike equities which are traded till 3:30 pm. Commodity trading comes with its own complexities and risks, driven by international market prices. He suggests that traders need to understand these different dynamics.
Not only Sebi but also the Reserve Bank of India (RBI) has highlighted the growing problem of derivatives trading. Also, the Economic Survey before the Union Budget addressed the issue.
According to SEBI data, 92.5 lakh retail traders and holding companies incurred trading losses of Rs 51,689 crore in FY24. The consultation paper aims to introduce measures to strengthen the index derivatives framework, it added
Gupta sees the Multi Commodity Index (MCX) as the biggest gainer. It is the largest commodity exchange in the country.
With similar sentiments, Ghose expects that MCX will benefit in the medium to long term, leading to higher volumes and revenue growth for the exchange. He recommends a ‘Add’ view on the stock on dips, considering the recent run-up in the share price. However, he advises against making large sums of investment at once.
Among SEBI’s proposed measures, the reduction in weekly expiry options will have the most significant impact. By limiting expirations to two per week, this initiative aims to discourage speculative trading and promote more consistent trading volumes.
Apart from the reduction in expiry days, Trivesh D considers the rationalization of strike prices as the second biggest step.
“By widening the available strike price range, SEBI aims to curb speculative trading to some extent. Collectively, these measures are designed to promote a more stable and efficient derivatives market,” he explained.
(Disclaimer: The recommendations, suggestions, opinions and views given by the experts are their own. They do not reflect the views of The Economic Times)