Currently, MCX’s average daily turnover is around Rs 2 lakh crore, Anuj Gupta, Head of Commodity & Currency at HDFC Securities, said. He expects gains of around 20-30% in commodities due to a shift from equity derivatives. Gupta noted that since commodity derivatives are available for trading, hedging, and arbitraging, traders can take advantage of opportunities in the commodity segment.
As an example, he mentioned crude oil options, which he said have decent volumes on the Multi Commodity Exchange of India (MCX) and are popular among traders and high-frequency trading (HFT) players. He implied that some activity might shift from equities to commodities.
In India, several commodity exchanges cater to different niches, including the 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 offer an alternative for traders seeking volatility and speculative opportunities,” said Rahul Ghose, CEO of Hedged.in. He added that the introduction of mini contracts in nearly all commodities has further boosted retail participation, allowing traders to trade natural gas, crude oil, and silver with a capital ranging from Rs 10,000 to Rs 25,000.Meanwhile, Trivesh D, COO of Tradejini, anticipates that SEBI’s curbs will impact weekly expiry days, with volumes expected to decrease. The regulator has proposed reducing the number of weekly expiries to two per week, one per exchange.Currently, weekly contracts expire on all five trading days of the week.
The analyst anticipates a modest increase in trading volumes for commodities with SEBI’s curbs in place, while ruling out any substantial shift.
The Tradejini COO also does not anticipate a material impact from the measures, suggesting that the speculative mindset of traders could still persist.
Ghose of Hedged.in noted that the peak trading time for commodities is from 5 to 9 pm, unlike equities which trade until 3:30 pm. Commodity trading comes with its own set of complexities and risks, driven by international market prices. He suggested that traders need to understand these distinct dynamics.
Not only Sebi but also the Reserve Bank of India (RBI) has highlighted the growing issue of derivative trading. Additionally, the Economic Survey ahead of the Union Budget addressed this concern.
According to SEBI data, 92.5 lakh retail traders and proprietorship firms incurred trading losses of Rs 51,689 crore in FY24. The consultation paper aims to introduce measures to strengthen the index derivatives framework, enhancing
Gupta sees the Multi Commodity Index (MCX) to be the biggest beneficiary. It is the country’s largest commodity exchange.
Echoing a similar sentiment, Ghose anticipates that MCX will benefit in the medium to long term, leading to higher volumes and revenue growth for the exchange. He recommends an ‘Add’ view on the stock on dips, considering the recent run-up in the share price. However, he advises against making a lump sum investment in large quantities.
Among SEBI’s proposed measures, the reduction in weekly expiry options is likely to have the most significant impact. By limiting expiries to two per week, this initiative aims to curb speculative trading and promote more consistent trading volumes.
Apart from the reduction in expiry days, Trivesh D views the rationalization of strike prices as the second most impactful measure.
“By widening the range of available strike prices, 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: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)