Commodity OnlineMUMBAI: Will the financial tumoil in the United States that has hit investment banks badly affect the commodities sector in India? Not really, says India's apex commodities market regulator the Forward Markets Commission (FMC).
According to FMC Chairman B C Khatua, Indian commodities sector is largely insured against any major crisis thanks to the unprecedented financial meltdown in America economy.
But he said India needs to strengthen the regulatory mechanism for commodity futures trading.
“The financial meltdown in the US is a great lesson for us. It may not affect the commodity sector in India but we need to strengthen our regulatory mechanism,” Khatua said.
“US meltdown was a case of greed for money. Allowing markets to go unregulated is a dangerous thing. The US housing and financial sectors have been pretty ambitious and greedy in the race to retain the number one position,” Khatua said
The tumble in oil prices since July has led to a broad sell-off in commodities. Of the 21 commodities tracked by the Deutsche Bank, only four, including sugar and timber, have shown positive returns so far in the second half of this year. The others have posted losses ranging from 5 per cent to as high as 40 per cent.
According to the Reuters-Jefferies CRB Index, a global benchmark for commodities, the prices have hit a six-and-a-half month low. In the wake of the price tumble, the debate is, should commodities, which has seen a boom lasting nearly seven years, be finally shunned by investors.
