Jaipur (Rajasthan), September 21, 2015: In an effort to further contribute in developing the bullion market in India, and educate its stakeholders about the benefits of hedging, Multi Commodity Exchange of India Ltd. (MCX) and Sarafa Traders Committee, Jaipur, jointly organized an awareness programme on Saturday, September 19, 2015 at Jaipur, Rajasthan.
The programme specially designed for members of the association, and local bullion market participants in and around Jaipur, was meant to impart knowledge about the bullion futures market, and further to familiarize the participants with the price risk management tools offered by commodity exchanges such as MCX to effectually manage their price exposures. Furthermore, the experts threw light on the market fundamentals and the functioning of commodity exchanges.
The commodity futures contracts offered by MCX serve two important economic utility functions of price discovery and price risk management thereby protecting the commodity market participants from adverse price movement. MCX offers different variants of gold futures contracts with denominations varying from 1kg to as small as 1gm to suit various participants’ hedging needs. Similarly, in silver, MCX offers contracts of denominations varying from 30 kg to 1 kg. Bullion futures at MCX are traded in Indian Rupee, thus mitigating currency risk while hedging on the Exchange platform, avoiding the risk encountered in hedging on international exchanges
While explaining about hedging and highlighting the criticality of risk management in this dynamic environment, Mr. Shivanshu Mehta, Vice President- Business Development, MCX said, “Hedging is a strategy to offset price risk that is inherent in the spot market by taking an equal but opposite position in the futures market. The idea is to offset the loss in one market with profit in other market. Hence, the bullion future contracts can be used by the stakeholders of the Indian bullion industry to protect their businesses from adverse price movements which could drastically dent the profitability.
“In recent times the risk of uncertainty and volatility in gold prices has been really high. Hence, it becomes imperative for the bullion stakeholders to hedge the risk associated with the prices”, he added.
Mr. Kaillash Mittal, President, Sarafa Traders Committee, Jaipur said, “Such awareness programmes organized by MCX in every nook and corner of the country will empower the market participants including the bullion stakeholders with the knowledge and benefits of commodity futures markets. This will enable them to manage their price risks effectively.”
“I would like to add that MCX’s gesture to spread financial literacy, thereby making the commodity markets more inclusive, is laudable”, Mr. Mittal stated.