InvestorQ : What can Budget 2020 do to give a long term thrust to the commodity markets trading in India?
Rashi Mehra made post

What can Budget 2020 do to give a long term thrust to the commodity markets trading in India?

Answer
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sarah Leo answered.
9 months ago


There are many things the budget can do but I can talk about 3 important things that can add depth and breadth to the commodity markets in India. Let me elaborate.

· It is time to catalyze the launch of new and exotic products in commodities. There has been little by way of new products introduced. Options have been launched in a halting manner while options on direct commodities are under consideration. It is time to look at global commodity indices, ETFs on commodity indices, inverse products that allow taking short positions on indices, commodity spread contracts etc. These will add depth and also get institutional investors to play a more active role in the commodity markets in India.

· It is time to integrate spot and futures markets in a big and significant way. A long unfinished agenda has been integration of spot and future markets in terms of regulation and cross margining facilities. Today, futures are regulated by SEBI but spot commodities are still regulated by the respective states. At least for the purpose of trading in commodity futures and options, these regulations should be standardized. Secondly allow cross margining between spot and futures market to reflect risk.

· Finally, the markets need a good and proper resolution to the long standing NSEL issue. The NSEL scam caused a loss of Rs.7,000 crore to investors and there has been little progress even after 7 long years. It is time to close the issue and book the perpetrators. That will give confidence that SEBI is really serious about the integrity of markets. It will also be a sentiment booster

These 3 are structural adjustments and will go a long way in building confidence and interest in the commodity markets.