New Delhi: Finance Minister Arun Jaitley on Tuesday launched gold options trading on the leading commodity bourse MCX and said this is one of the steps towards formalising gold trade.
After the success of the gold options, MCX said it will approach the regulator Sebi seeking permission for other commodities like cotton, crude palm oil, silver and copper.
At present, MCX offers futures trade in gold and other commodities even as the industry has been demanding other products like options trade also for hedging.
"This marks a very important evolution in trading of yellow metal itself. It hedges all risks by giving them (traders) the option of futures," Jaitley said after unvieling the options trade on the auspicious day of Dhanteras on Tuesday.
Indians are great buyers of gold. This new product will be extremely successful, he said.
Emphasising that the government is taking efforts to formalise gold trade, Jaitley said, "I am sure more it formalises, better it is for consumers, jewellers and those trading in this. That's in consonance with the business environment for future that we see for us". This is the first product for options trading that the regulator Sebi has allowed after 14 years of commencement of commodity exchanges in the country, he added.
According to MCX, gold options contracts are available for trading from Tuesday and investors can trade in one kg gold. The contracts will expire in November and January 2018.
Asked about measures taken to promote the new product, MCX Managing Director and CEO Mrugank Paranjape said: "Fundamentally, it is an extremely low-cost product. However as an introductory measure, we are not charging any transaction fee on this product till December."
From the exchange perspective, that will be a good enough time to develop the market, he said. On plans to launch more commodities under options category, he said, "As per the Sebi rule, options trade is allowed in a commodity which has certain volumes in futures trade. We have 7-8 commodities like cotton, CPO, crude, silver, zinc and copper which qualify."
The exchange has not applied for new commodities. "After 3-6 months, we will decide after looking at the success of the gold options."
Terming it as a major reform, MCX Chairman Saurabh Chandra said: "Options would complement the existing array of commodity futures contracts and help in enriching the informational efficiency of the market s price discovery process. It gives market participants great flexibility to manage risk and achieve their trading objectives.
There has been a very conscious effort by the government and Sebi to develop and integrate commodity markets in a phased manner, he said.
To further strengthen the market, he said that a committee has been set up in NITI Aayog to integrate spot and derivative markets. Another committee set up by the finance ministry is looking at way to transform India's gold market.
Investors pull ₹ 388 cr out of gold ETFs in April-Sept
New Delhi: Gold exchange-traded funds (ETFs) continued to lose sheen as an investment class as investors pulled out Rs 388 crore from these instruments in April- September 2017.
Trading in gold ETF segment has been tepid during the last four financial years. It witnessed outflows of Rs 775 crore in 2016-17, Rs 903 crore in 2015-16, Rs 1,475 crore in 2014-15 and Rs 2,293 crore in 2013-14.
On the other hand, equity and equity-linked saving scheme (ELSS) saw an infusion of more than Rs 80,000 crore during the first six months (April-September) of the current financial year. This included an investment of close to Rs 19,000 crore in the last month alone.
Stock markets have been on an upswing, touching new highs this year.
According to Anshul Saigal, portfolio manager at Kotak Mutual Fund, investors are opting for equity over gold and other asset classes in the past few years as equity has given good return.
Gold ETFs are passive investment instruments that are based on price movements and investments in physical gold.
"While demand from India has traditionally buttressed gold prices globally, sound rally in the Indian equity markets has meant that gold as an asset class has not been favoured. A a strong Indian equity market may mean a sober outlook for gold," Vidya Bala, head of MF Research at Fundsindia.com said.
Further, demonetisation and lower gold price from a strengthening rupee has kept its prices low although imports of the metal shot up, she added.
According to the latest data available with Association of Mutual Funds in India (Amfi), a net sum of Rs 388 crore was pulled out in 14 gold-linked ETFs during April-Septemer period this year.
The outflow meant assets under management (AUM) of gold funds plunged to Rs 5,148 crore at September-end from Rs 5,480 crore at the end of March.