Chennai: High levels of volatility in prices and rupee movement saw the monthly turnover of diamond futures contracts on Indian Commodity Exchange grow 14-fold in February compared to what it was six months back. This has helped the overall turnover of the exchange move up five-fold.
Trading value of diamonds stood at Rs 4,531.50 crore in February 2019 against Rs 318 crore is September last year. According to the exchange, high levels of price volatility saw increased trading activity.
Ajay Kedia, MD, Kedia Commodities finds that apart from price volatility, sharp movement in rupee too helped the turnover growth.
“Between early September and December-end, one cent diamond contract prices fell 9.5 per cent from Rs 3,771 to Rs 3,216. Trade war fears and rupee depreciation led to the fall in prices. By January-end prices shot up by 6.5 per cent and were trading in a narrow range throughout February. By February-end once again prices fell from Rs 3,590 to current levels of Rs 3,480. This time, appreciation of rupee and the improvement in equity market pulled down the diamond futures prices. The US key economic data too have been influencing the prices,’ he said.
Diamond contracts were launched by ICEX in August 2017 to provide exporters with a hedging tool. However, people who are into currency hedging too are finding diamond contracts a good tool as the rupee trading ends by 5 pm and the diamond futures market remains open for trading till 11.30 in the night, added Kedia.
Physical delivery of diamonds too touched new highs in February. Diamond contracts helped the total turnover from trades on ICEX witness five-fold jump to Rs 5,332.50 crore in the last six months. In September 2018, the exchange had recorded a turnover of Rs.1,090.34 crore and since then it has been consistently witnessing increase in volumes. Nearly 85 per cent of the Feb. turnover was generated by diamond futures contracts.
“Several factors may be attributed to increase in turnover which includes among many, continuous training and education among the target audience, fundamental factors responsible for price volatility, introduction of new commodities and a few desirable changes in the contract design of this flagship diamond contract,” ICEX CEO Sanjit Prasad said. Even in case of daily turnover, ICEX hit a lifetime high of Rs 418.16 crore on February 27, 2019. The average daily volumes in February stood at Rs 266.63 crore.
