Despite the proposal to levy a commodities transaction tax and the recent ban on futures trading in four commodities, high crude oil prices have helped commodity brokerages clock better volumes.
“Our volumes have picked up in the last two months. Crude oil prices were moving up one way and we have seen a lot of activity in that counter. In fact, we clocked the highest turnover for the current year in the week crude oil prices touched an all-time high,” said Naveen Mathur, Country Head of Commodities at Angel Broking. Mirroring the trend, crude oil volumes touched a record high of 10.6 million barrels on May 29 on the Multi-Commodity Exchange platform, according to the data available on the exchange website.
Higher crude oil prices have a pass-on effect on bullion prices as investors across the globe buy more gold as a hedge against inflation. Crude oil prices soared above $135 a barrel to hit an all-time high towards the end of May. As a corollary, gold prices picked up 4.6 per cent from an interim low of $852.70 an ounce on May 1 to touch $892.49 an ounce on Tuesday, according to Bloomberg data.
With the government imposing a ban on futures trading in soya oil, rubber, chana and potato recently, commodity market participants and intermediaries are a worried lot. Coupled with uncertainty over the imposition of a commodities transaction tax, this had seen traded volumes go down at brokerages and on exchanges.
But crude oil prices brought day traders back into action. "We recorded the highest turnover in 2008 so far in the last week of May," said Geojit Financial Services Managing Director CJ George.
Major participants in crude oil futures on the exchange platform include corporate houses, airline companies and end-users of crude oil, including Reliance Industries and Indian Oil Corporation.
"However, actual delivery in crude oil contracts is usually lower than 1 per cent as storage and transport of the commodity demands huge and costly infrastructure," said an MCX executive.