Commodity Volumes

India is an elastic market, key fundamental data and announcements can have drastic effects on trading activity. Earlier this year, India’s government put new measures in place to tax commodity trading, the Commodity Transaction Tax (CTT) was implemented despite protest from the chiefs of all major commodity trading venues. As expected, trading volumes slumped with activity believed to be 40% to 50% lower.

Amar Ambani, Head of Research at IIFL, an Indian regulated broker explained to Forex Magnates in a statement: “Levy of 0.01% CTT has definitely dampened the volumes on the commodity bourses, with MCX average daily turnover down by drastic 40%. This can be explained by the fact that jobbers (speculators) which contributed 40-50% of the MCX volumes are out of the business. Jobbers survived on wafer thin margins and proportionately paid very low transaction costs. After the advent of CTT, the costs have dramatically increased, which has made it difficult for the price sensitive jobbers to sustain.”

2014 will be an interesting year for India as the 1.2 billion nation goes to vote. The right-wing BJP is in pole position to overthrow a controversial Congress Government. Asad Hussain a Mumbai-based analyst explained to Forex Magnates: “The BJP is a favourite among India’s business community, polls carried out by Team Cvoter show that BJP could win 162 seats next year.”