By Geena Paul
NEW DELHI: Year 2008 saw the much-touted equity market crashing like nine-pins and investors’ trust in equities hitting the nadir. Even as the stock markets across the globe struggle to keep its head above the surging waters of global meltdown, one Silver lining was visible for the commodities sector.

As stock markets plunged across continents following the global market meltdown triggered by the US subprime crisis, investors started their desperate hunt to find a safe haven to park their money. Till then, they thought banks were safe places at least to keep their money but that dream was shattered when well-known banks surrendered meekly to the meltdown waves. So, people started hunting for something which can help them make some bucks in the time of crisis. The ultimate and the time-tested area was commodity markets. To be specific: Gold.

The meltdown triggered a Gold rush and the prices of yellow metal crossed Rs 14,000 per 10 gm. This rise and the mad rush for gold helped commodities markets and the turnover of commodities markets in India posted good gains in 2008, a year otherwise spelt doom for the country (remember the non-stop terror strikes, inflation at 12 per cent and the meltdown impact).

Among the ruins of 2008, commodities markets emerged as the sole winner in the year with the exchanges set to end the year with a record turnover of Rs 50,00,000 crore, an impressive 40 per cent surge.

Apart from the gold rush another factor which helped the surge is the entry of new players like Anil Ambani, Kotak groups, emerging conglomerate Indiabulls and public sector entity MMTC.

However, there were dragging factors also like the Crude Oil price crash. From $140 per barrel crude oil prices crashed to below $40 level in 2008. In fact, crude was the worst performer at the exchanges in 2008.

Another hurdle for the exchanges was political opposition. Several parties opposed Futures trade during the high inflation days when the rate was above 12 per cent.

Politicians blamed Futures trade for high inflation and even banned trade in several commodities.

Despite all these odds, at the end of November, the total turnover at the country’s various commodity exchanges totaled at Rs 46,65,295 crore, which will grow past Rs 50,00,000 crore when the figures are published for December. In comparison, the total turnover for 2007 stood at Rs 36,53,895 crore.

The beginning of the year was good for commodities when the Centre came out with an ordinance to amend the Forward Contract Regulation Act to give more power and independence to the commodity market regulator Forward Marketing Commission (FMC).

Later, following high inflation rates, UPA government was unable to pass the Bill in Parliament and the ordinance lapsed.

After that the Centre suspended Futures trading in soyaoil, rubber, Chana and Potato in May till November.

The trading has been allowed from start of this month only as inflation came down to single digit, though the ban on trading of wheat, rice, Tur and Urad imposed early last year continues.

The rise of commodity exchanges spawned an increased interest from corporate biggies like Reliance Money, Kotak, MMTC and Indiabulls and they decided to foray into the commodity market.

While MMTC and Indiabulls formed a joint venture to set up fourth national commodity exchange in the country, which is expected to be operational early next year, Anil Ambani group company Reliance Money picked up stake in NMCE and Kotak group in Ahmedabad-based National Multi-Commodity Exchange.

An upsurge in interest was not only limited to India Inc as the Indian commodity futures market came on the radar of global comexes with NYSE picking 5 per cent stake in MCX at about Rs 240 crore.

With more global players eyeing Indian commodity market, the Centre spelt out a policy for foreign direct investment in commodity exchanges and kept a cap of five per cent.

Another major development taking place in the commodity market was launch of electronic spot exchanges in the country, which would go a long way in benefiting farmers in getting better remuneration.

Abhijit Sen Committee, in its report, has stated that the Futures markets efficiency is contingent on the efficiency of spot markets. MCX-promoter Finacial Technologies and NCDEX have launched spot exchanges in some states.

The year 2008 did not go as expected for the commodity market but there is a glimmer of hope that things would improve next year.

Again, ban on trading of wheat, rice, tur and urad could be lifted soon, which would provide a big boost to the market.