Move over, Sensex, this seed is hottest bluechip

India’s two biggest commodities exchanges have seen their volumes zoom in the last couple of months. This week, for the first time since it began trading in 2003, daily volumes at the National Commodities and Derivatives Exchange (NCDEX) whooshed past the Bombay Stock Exchange (BSE)—and that’s for five days running. On Thursday, NCDEX volumes hit an all-time high of Rs 2,478 crore. That same day the BSE recorded volumes of Rs 1,575 crore.

Trading usually hits a high in gold, silver and agri-commodities like castor and soyabean. But the hot ticket driving this latest boom at the NCDEX is an innocuous-looking seed grown mainly in western Rajasthan, where the monsoons started late and fell below expectations this year. The futures price of guarseeds—used in medicines, icecream, toothpaste and even lubricants—have consequently seen a staggering 52 per cent rise, to Rs 1,928 a quintal on September 10, from Rs 1,268 on July 1. ‘‘At least send me some guarseed so I can see what I’m trading,’’ one south Indian trader recently told PH Ravikumar, managing director and CEO at NCDEX. In Sri Ganganagar, a Rajasthan district of four lakh people, a stone’s throw from Punjab, Haryana and Pakistan, commodities broker Devender Mittal says he has never seen his business boom like this.

‘‘My trading volumes have multiplied by 20 times in the last two months,’’ says Mittal who has dabbled in commodities for 17 years now. Mittal says that thanks to guarseed, all his investors have reaped hefty returns—from 36 per cent to 60 per cent—in the last couple of months. A large chunk of the trade in this commodity originate from Rajasthan as the state contributes some 70 per cent of the country’s total guar production.

Analysts say commodities are gaining popularity as an investment option among high net worth individuals, stockbrokers and even retail investors. ‘‘Earlier, it was restricted to traders associated with the market. Now, outsiders are coming in,’’ says Joseph Massey, deputy managing director at NCDEX’s biggest rival, the Multi Commodity Exchange of India (MCX). Eighty percent of the trading at MCX is done in gold and silver futures. Here too, daily volumes have zoomed to an average Rs 600 crore daily, from an average Rs 150 crore in March.

Commodities trading in India went online a year ago. Before that, futures trading in commodities was banned for 40 years and most transactions took place in regional mandis and unofficial markets. Now, nearly 200 of MCX’s 700 registered members are stockbrokers.

‘‘Stockbrokers and equity investors are getting in because they have realised that commodities also deliver good returns and need lower margins,’’ says Madan Sabnavis, chief economist at NCDEX.

Of course, with any sudden price volatility, there is always someone who strikes a cautionary note. ‘‘It appears what is happening in guar is not natural,’’ says Massey, whose mostly metals exchange has been left out of this latest boom. In Rajasthan, Mittal alleges that speculators have started warehousing guarseed to create an artificial shortage and drive prices higher. ‘‘Saara maal bazaar se out ho gaya hai (there’s no stock left in the market),’’ says Mittal. ‘‘Everyone has locked it up in the godown.’’

But whether the rally on guarseeds goes bust or not, it’s clear that the action in commodities is only just beginning. Next up? The launch of other big-ticket commodities like steel, the entry of foreign investors, the launch of commodities funds and getting Indian companies to start hedging.