NSE eyes growth in commodities market, set to launch new contracts soon

The National Stock Exchange of India (NSE) is preparing to expand its commodities segment with plans to launch new contracts in the coming months, aiming to make a significant impact on commodities trading. NSE Chief Business Development Officer Sriram Krishnan stated that the exchange is focusing on non-agricultural commodities, citing their relative certainty compared to agricultural ones.

These new contracts will be selected from a wide range of commodities approved by the Securities and Exchange Board of India (Sebi). Krishnan highlighted that the exchange already has around 240 members actively participating in commodities trading, including foreign portfolio investors and algorithmic traders.

Krishnan expressed confidence in the potential growth of India's commodities market, explaining that there is significant opportunity to expand, particularly in key products such as crude oil and natural gas. He also emphasised the importance of cash-settled contracts, which were a key request from foreign portfolio investors.

On the broader outlook for the NSE, Krishnan predicted that the market capitalisation of NSE-listed companies could double within the next decade, reaching USD 12-13 trillion from its current USD 5.5 trillion, fueled by the growing Indian economy. This growth would be driven by existing companies as well as the addition of new listings, including the many unicorns that are not yet listed.

Despite India's large equity and derivatives markets, Krishnan pointed out that its commodities market remains underdeveloped. He noted that in developed economies, the commodities market often exceeds the size of the equity market, serving as a cornerstone for sectors like agriculture, manufacturing, and infrastructure.

The NSE's commodities push is also backed by NSE Clearing Ltd., which has a substantial Rs 10,500 crore settlement guarantee fund, offering security to market participants.

Regarding the NSE’s upcoming IPO, Krishnan confirmed that the exchange has not yet received approval from Sebi. The exchange has reapplied for a "no-objection" certificate and will proceed with the IPO once it receives approval and completes the necessary regulatory steps.

(With inputs from agencies)