India may soon have rough diamond Futures
Commodity Online MUMBAI: A new venture of the Multi Commodity Exchange (MCX) will soon add sparkle to the exchange.
Considering the potential, India’s leading commodity exchange has decided to launch rough diamond Futures soon.
The International Diamond & Gold Convention in Mumbai has drawn attention towards this and the issue is being discussed at the meet.
Futures trade in rough diamonds would help traders hedge against currency appreciation and the demand-supply position. It also helps them concentrate on designs, cuts and polishes.
This is important at this time following the strengthening of rupee in the recent past. Moreover, Indian jewellery makers have started using roughs more in jewellery meant for weddings.
According to officials, the MCX has been trying to find a unified standard for diamond Futures, but is yet to decide on one. The exchange would standardise a uniform benchmark in the near future.
On the other hand, the Forward Markets Commission (FMC), the commodity markets regulator, is planning index Futures in rough diamonds.
According to FMC, a small change in cuts and polishes change the standard of diamonds and, thereby, the price. Hence, a uniform standard is very difficult to arrive at. In such commodities, only index Futures can be thought of, said an FMC official.
India is one of the best polished diamond markets in the world. Over 83 per cent of the country’s gems and jewellery that are cut and polished account for exports. Surat and Jaipur are famous for their top notch polishing and designing centres.
The domestic diamond jewellery market is estimated at around Rs 8,000 crore per annum in retail value.
Because of increased disposable income and the industry’s aggressive promotion strategies, the demand in India is likely to remain upbeat in months ahead.
Diamond jewellery demand has increased significantly in recent years, from Rs 1,970 crore in 1995 to around Rs 8,000 crore in 2005. The demand in retail value has remained stable at around 71 per cent.
India at present sources roughs from Antwerp, despite having the capability to import, cut and polish all types of diamonds directly.
This process only increases input cost, resulting in jewellery items getting costlier in comparison with the nearest competitors, Israel and China. The rupee appreciation is also hurting finished jewellery exporters.
NCDEX GARSEDJDRJUN12 20 June 2012
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