On Day 1, volumes touch 40% of market leader MCX
The first day of the launch of the cotton futures contract on the BSE saw encouraging participation from stakeholders.
On Monday, 539 lots of Cotton March contract were traded till the evening trades on BSE platform, which is about 40 per cent of 1,376 lots traded on market leader, MCX.
The Cotton Association of India (CAI), which helped the BSE to develop and design the cotton futures contract, expressed confidence that participation will increase further.
“This is probably the first such contract, suggested by the trade on its own terms. Unlike other contracts, BSE’s cotton contract is not enforced upon the stakeholders. In fact, it takes care of the interests of the participants. We are confident that in a short span it will gain 50 per cent market share,” Atul Ganatra, President, CAI, told BusinessLine. On Monday, BSE cotton March 2019 opened at Rs. 20,430 a bale (each of 170 kg) and last traded at Rs. 20,380. On MCX, cotton futures for March delivery opened at Rs. 20,500 a bale and last quoted at Rs. 20,390 in evening trades. The trading is to continue till 9 pm.
The total traded value on BSE stood at Rs. 28.6 crore, while that on MCX stood at Rs. 70.67 crore.
According to CAI, on other platforms, a Gujarat-based ginner was required to give location discount, which runs as much as Rs. 10,000 per lot in some cases for delivery outside Gujarat, while BSE’s contract doesn’t ask for a location discount. The basic delivery centre for the cotton contracts is Rajkot with additional delivery centres at Aurangabad, Jalgaon and Yavatmal in Maharashtra; and Mundra and Kadi in Gujarat.
Similarly, for spinning mills, BSE’s cotton contract is comparatively more attractive as it doesn’t require them to pay premium charges at the time of taking delivery. Unlike other bourses, which charge as much as 2 per cent premium charges on the price, BSE’s cotton contract doesn’t charge a price premium, Ganatra stated.
Ashishkumar Chauhan, MD & CEO, BSE, said: “With the launch of cotton contracts, we look forward to gain wider participation from cotton business stakeholders.”
BSE launched the March contract for cotton with a lot size of 25 bales (each of 170 kg) and delivery unit will be 100 bales with a zero transaction charge for the initial period.
Indo-Pak tension: no impact
Meanwhile, the industry does not see much of an impact on the cotton trade with Pakistan after the Pulwama terror attack.
For India, Pakistan has been an irregular buyer of the fibre. According to Ganatra, about 10 lakh bales were contracted to be exported to Pakistan, of which about 6-8 lakh bales have already been shipped and the remaining will also be shipped without much impact.
Cotton export from India is estimated at around 50 lakh bales for the year 2018-19. This is lower by about 19 lakh bales as compared to the 69 lakh bales estimated for the last year, primarily on account of lower crop projections.