Retail participation in commodity derivatives will be critical going forward for the commodity market, especially agricultural commodities, stated experts during an NCDEX-CPAI panel discussion. The derivative market in India is quite developed, yet it has not made a major move.
The panellists for the session ‘Agri Commodity Derivatives - Diversify with the most robust segment in the Indian economy’ were Vandana Bharti, Assistant Vice-President, Commodity Research at SMC Global; Kapil Dev, Chief Business Officer, at NCDEX and Anil Ghelani, Head of Passive Investments & Products at DSP Investment Managers. The session was moderated by R N Bhaskar, Consulting Editor, FPJ.
Vandana Bharti said, “Retail participation is important for the market.” This will allow for more liquidity in the market. She added, “Hedger participation will make the market stronger. We will gradually become a trendsetter in Asia.”
Adding to it, Narinder Wadhwa, President of CPAI, who delivered the theme address, said, “The regulator understands the need for retail participation. It has called a meeting of Mutual Funds, FPOs, CPAI and others to discuss the possibility.”
Anil Ghelani admitted that agri commodity is a highly uninvested area among the investors. “Commodity is an unexplored asset class for Indian investors.” He said the best way to address this will be by following the ‘BAR’ method -- B means benefit awareness, A means accessibility provided to the investors, and R means regulatory support to these investors.
In addition, Kapil Dev said retail participation has started, but it is still not low. However, a lot of missing parts have already started to fall in place as retail participation increases. Dev also admitted that this market has been highly volatile and it continues to be the same. At the same time, the opportunities are huge which have not been explored yet, he stressed.
Ghelani admitted the opportunities are available. But he reiterated the need to provide investors with some comfort to start with is important. Along with success stories, India needs to highlight the benefits, stated Ghelani.
He suggested that the idea of discipline in terms of asset allocation which also includes investment in commodity derivatives should be presented to investors.
Bharti opined that it is the right time to grab the market opportunities, mainly due to digitalisation. Today farmers are all aware of the various initiatives. Thus, making them understand the impact of hedging can go a long way, she stated.
With rising input costs in agriculture, the prices of agricultural produce should be allowed to move upward. Only this will allow farmers to double their income, Bharti explained.
