One-1042b

Slide 1: 

March 14, 2007

NCDEX – 6th largest commodity exchange in the world : 

2 NCDEX – 6th largest commodity exchange in the world Source: UNCTAD, SFOA “ The world’s commodity exchanges – September 2006

NCDEX- 3rd largest agro-commodity exchange in the world : 

3 NCDEX- 3rd largest agro-commodity exchange in the world Source: UNCTAD, SFOA “ The world’s commodity exchanges – September 2006

Market growth of 265% over FY05 volumes; 56% growth over FY06 : 

4 Market growth of 265% over FY05 volumes; 56% growth over FY06 Unlike developed markets, participation in Indian market is more retail & individual and not institutional

Present volumes a fraction of the potential : 

5 * Bullion Metals etc Agriculture Energy Total Farmers Agents Wholesalers Processors Retailers Present volumes a fraction of the potential USD Bn Source: NCDEX

Present legal & regulatory environment : 

6 Present legal & regulatory environment

Market Structure- Futures and Spot : 

7 Market Structure- Futures and Spot Spot markets Futures Market Forward Markets Commission Ministry of consumer Affairs Unlike Forex and Stock markets; Spot markets in commodities are not within the purview of the Exchanges/Regulators State Government

Regulatory Structure in India : 

8 Regulatory Structure in India Banking / NBFCs RBI Ministry of Finance SEBI Capital Markets NABARD Co-operative Banks & Regional Rural Banks Ministry of Consumer Affairs FMC Commodity Exchanges Insurance Regulatory Development Authority (IRDA) Insurance Pension Funds SIDBI State Financial Institutions National Housing Bank Housing Finance Companies Company Law Board Corporates Pension Funds Regulatory Development Authority (PFRDA)

Slide 9: 

9 20 Other Regional Exchanges NMCE Commodity Exchanges MCX Structure of Indian Commodity Futures Exchanges National exchanges Regional exchanges FMC NBOT NCDEX

Going forward … : 

10 Going forward …

New Products : 

11 New Products Market would move towards trading more exotic products Index based products Commodity Indices Rainfall & other weather indices Spread Trading Electricity Real Estate Emission Credits ..Idea will be to forge closer links with global commodities

Instruments to be introduced : 

12 Instruments to be introduced Options Provide up-side benefits to the market participants Offer a market driven MSP to the farmers Indices Built-in diversification Exchange for Physicals (EFPs) Easy of trade for hedgers who would like to take or make deliveries ..new instruments to attract new market participants

Attracting new participants : 

13 Attracting new participants Farmers Offering them pre & post harvest risk mitigation platform Ease of trade through aggregators Banks Role of aggregators Proprietary trade Mutual Funds Attracting retail trade to the commodity exchanges FIIs FDIs

Risk Mitigation: Pre-harvest : 

14 Risk Mitigation: Pre-harvest Small Farmers Small Farmers Aggregators Banks Insurance NCDEX NCMSL Future price ensured Liquidity enhanced Weather derivatives /Crop Insurance Bank lending Large Farmers

Risk Mitigation: Post-harvest : 

15 Risk Mitigation: Post-harvest Small Farmers Sell forward Storage facility Assaying & grading Commodity backed bank finance (WR) Large Farmers Banks NCDEX NCMSL

Survey carried out by A C Nielsen : 

16 Survey carried out by A C Nielsen Wide Area Sample, Sample Size - 255 Narrow Area Sample, Sample Size - 473 Over 78 % of farmers from NAS & 12 % of WAS agreed that they have benefited out of the price discovery taking place through commodity exchanges As NAS respondents are well aware of market dynamics ( including futures market, they are able benefit through better price realization) Increase in awareness level in interior areas about commodity futures will help the farmers

Typical farmers awareness programmes : 

17 Typical farmers awareness programmes A large number of participants Alwar, Rajasthan on 27 February 2007 Speakers include the regulators – FMC; key officials of NCDEX; important officials of the government machinery

Increased bank participation on the exchange platform : 

18 Increased bank participation on the exchange platform farmer farmer farmer Bank branch Banks takes consolidated position on behalf of its customers Bank branch Exchange farmer farmer Bank to also take proprietary positions

Facilitating lending against commodities : 

19 Facilitating lending against commodities Banks’ lending against commodities in FY06 was USD 1,334 million NCMSL facilitated finance against commodities to the tune of about  USD 80 million as on 31st March, 2006  ICICI  Bank: USD 50 million HDFC Bank:  USD 22 million Other banks: USD 8 million  Average Interest rate charged: 9.5% - 10.5% Number of defaults so far: NIL

Facilitation required : 

20 Facilitation required RBI Working Group Recommendations Banks to be allowed to have proprietary positions in agricultural commodity derivatives Evolution of a system for warehouse receipts which would be freely transferable Banks to be granted general permission to become PCMs of commodity exchanges

Foreign Access : 

21 Foreign Access Foreign access permitted in securities market- equities & bonds under regulation Currently can access commodity markets by setting up a domestic entity – for broking & investment Require prior approval from FIPB Precedents: Permission granted for Proprietary trade only No precedents for Client trade

RBI/SEBI notification dated 22.12.2006 : 

22 Permits Foreign Investment in infrastructure companies in Indian Stock Exchange to the tune of 49%, of which 26% - FDI (Foreign Direct Investment) With specific prior approval of FIPB 23% - FII (Foreign Institutional Investment) FII will be allowed purchases in secondary market FII shall not seek & will not get representation on the Board No foreign investor, including persons acting in concert, will hold more than 5% of the equity capital Similar notification expected for commodity markets… RBI/SEBI notification dated 22.12.2006

Regulatory Action in Jan-Feb 2007 : 

23 Regulatory Action in Jan-Feb 2007

Sudden delisting of important cereals & pulses - Jan-Feb 2007 : 

24 Sudden delisting of important cereals & pulses - Jan-Feb 2007 Delisting of Urad & Tur contracts – Jan 07 Suspension of Rice & Wheat contracts – Feb 07 Urad: Crop arrivals from Andhra & Burma expected in Feb-March Tur: Arrivals in March; 30-40% expected production shortage

NCDEX wheat price movements : 

25 NCDEX wheat price movements Temporary ban on wheat imposed Temporary ban; expected to be lifted soon…

Innovations by NCDEX : 

26 Innovations by NCDEX

Spot price polling : 

27 Spot price polling Commission Agents Manufacturers Refiner Mill owners Traders Mandi Statistical Cleansing of raw data Polled Prices Exchange Website Trading Terminals Info-vendor terminals Media– electronic & print Near real-time nationwide prices Polling done independently by CMIE & Crisil MW

Dematerialized holding of commodity balances : 

28 Dematerialized holding of commodity balances CLIENT DP NSDL R&T AGENT WH WH WH WH - Open Demat a/c With DP Gets goods to the WH, fills in Demat Request form for Demat credit Empanelled DPs in which members/clients open Demat account -Holds commodity balances in electronic form Facilitates transactions in commodities Link between the warehouse and the Depository. Standardized Screens Accepts goods for storage/ delivery Assaying done and information given to NSDL via R&T

Collateral management : 

29 Collateral management Set up National Collateral Management Services Ltd. (NCMSL) Warehousing, assaying Collateral Management Commodity backed financing Food procurement for FCI 2005-06 Paddy procurement project 1.2 lakh MTs paddy from MP, Orissa 2006-07 Paddy project 80,000 farmers involved 600,000 MTs of paddy

Price Dissemination : 

30 Price Dissemination

Automatic weather stations : 

31 Automatic weather stations Cabled Vantage Pro 2 Plus Collecting & disseminating data over multiple weather parameters

About NCDEX : 

32 About NCDEX

Our Shareholders : 

33 Our Shareholders

Ncdex’ market share in total volumes of key agri-commodities (April 2006 -Jan 2007) : 

34 Ncdex’ market share in total volumes of key agri-commodities (April 2006 -Jan 2007)

Exchange Profile : 

35 Exchange Profile

Thank You : 

36 Thank You

Market Share – Agri. Commodities : 

37 Market Share – Agri. Commodities

Large number of Physical Deliveries taking place on NCDEX Platform : 

38 Large number of Physical Deliveries taking place on NCDEX Platform Globally less than 2% volumes result in deliveries Physical deliveries are incidental Exchanges not delivery platform However, NCDEX has seen an average delivery of 40-50,000 MT per month Exchange’s are a platform for better prices discovery

Strategic Partners : 

39 Strategic Partners Global Business Warehouse & others Grading & Standards Tokyo Grain Exchange (TGE) Dalian Commodity Exchange (DCE) Intercontinental Exchange (ICE) Bharat Petroleum Gas Authority of India Ltd (GAIL) Bombay Bullion Association (BBA) Central Institute for Research on Cotton Technology (CIRCOT) Indian Agriculture Research Institute (IARI) Food Corporation of India (FCI) CRIDA Punjab State Cooperative Supply & Marketing Federation

Number of contracts traded - Economic Survey : 

40 Number of contracts traded - Economic Survey In millions