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MCX embarks on futures trading in cotton
Oct '11
India has worn away its decade old image of net importer of cotton. Records depict cotton production in the nation has increased by leaps and bounds. Currently, the country has cotton acreage of more than 90 per cent. Not surprisingly, India- the second largest producer of cotton has now become a net exporter of cotton.

Envisaging futures trading in cotton to go a long way in stabilizing cotton prices by reducing the short-term and seasonal variations in them, Multi Commodity Exchange Ltd (MCX), India's leading commodity exchange, has started offering cotton futures contracts, to the benefit of millions of cotton growers in the country.

"With the globalization of Indian cotton, cotton prices in India fluctuate in parity with the international prices of cotton," points Mr. Sumesh Parasrampuria, Director - Business Development & Products - MCX, in an exclusive talk with Fibre2fashion team.

Justifying thus, the rationale behind the launch of cotton futures, Mr. Parasrampuria explains that the movements in cotton prices are no longer entirely dependent on domestic supply of and demand for cotton but are also at the mercy of global fluctuations in prices.

He continues - "Consequently, cotton market participants such as cotton farmers, ginners, mills, merchants, and exporters face considerable price risks in their domestic as well as international market transactions. Hence, the need for appropriate mechanism for both effective price discovery and efficient price risk management cannot be overemphasized"

Considering the milieu, MCX's cotton futures contract has been designed in consultation with major cotton market players, and aims to effectively provide a benchmark price for cotton in India. "It also endeavors to help the diverse cotton trade and industry functionaries in managing price risks on their spot and forward transactions in domestic as well as export markets," adds Mr. Parasrampuria.

To know more about the details of cotton future contract, click here

Mr. Parasrampuria is an MBA in finance from Welingkar Institute of Management Studies, and has 360 degrees understanding of the commodities market. At MCX, he heads four core teams: Business Development, Institutional Marketing, Membership Marketing, and Product Knowledge and Management. He was earlier the Head of Commodities at Motilal Oswal.

Fibre2fashion News Desk - India

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