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Punjab turning into a hub for commodity derivatives

C. J. Punnathara

Kochi , Jan. 24

PUNJAB is progressing from being the wheat bowl of the country to the commodity futures trading hub. Some commodity futures trading houses have already set up a network in the State, while others have got it prominently on their radar.

"With immense support as well as demand from the people and the local trading community, our branch network in Punjab has shot up close to 50 in just over six months. The business volumes have also been growing much faster than in other States," Mr Giby Mathew, Executive Director of JRG Securities Ltd, said.

JRG has a network of 48 branches in the State with a regional office in Amritsar. In six months, Punjab contributed close to a fifth of the company's total commodity futures trading volume.

"Punjab has the unique combination of some of the richest agricultural farming communities in the country, as well as some of the most vibrant and energetic traders. After our consolidation in the Southern and Western markets, we will be focusing on the immense potential of the State," Mr C. J. George, Managing Director of Geojit Financial Services Ltd, said.

The interest is universal across Punjab, extending from the major trading centres of Amritsar, Jalandhar, Gurudaspur, Kapurthala and Batla to the smaller markets like Kanak mandi, Lohgarh, Manjit mandi etc.

There is also wide-ranging interest extending from speculative commodities like gold, silver and crude to agricultural commodities like wheat, rice, guar seed, urud dal, chana, jeera and menth oil.

Geojit is currently focusing on Gujarat and Maharashtra. The company plans to open up 40 to 50 branches in Punjab in the next expansion phase.

"Punjab would logically be not only the granary of the country, but also the biggest commodity futures market. It has a large number of cash-rich farmers with large holdings, whose tradition has been rooted to farming for hundreds of years. They have an inherent knowledge of the commodity markets and the financial fortitude to tide over the short-term storms of the market," Mr Akshay Agarwal, Managing Director of Peninsular Capital Markets Ltd, said.

Peninsular is planning to set up a regional office in Chandigarh with a network of branches across the State. While pointing out that these are still early days for commodity futures in Punjab, Mr Reji Mathew, Managing Director of JRG Securities Ltd, said: "Most of the commodity derivatives trading undertaken in Punjab are on speculative commodities like gold, silver and crude, as well as those, which offer high liquidity like wheat and rice.

As the futures market matures, we expect a slow shift from speculative to high-liquidity commodities, but the duality is expected to continue."

JRG said currently, there was almost no competition in the commodity futures market in Punjab.

It is confident that the commodity volumes from the State would more than triple in the coming year.

South Indian brokers seem to be way ahead of their North Indian counterparts in the commodity futures trading. "The inherent belief in the integrity and honesty of South Indian brokers have also stood the company in good stead," Mr Giby said.

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