Unlocking Gold's Potential- IMC Event- 22nd Dec.2016

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Presentation transcript:

Unlocking Gold's Potential- IMC Event- 22nd Dec.2016 By Shripal Shah

Exchange Platform & Gold hedging India one of the biggest market for gold; hedging interest is shifting to exchange traded derivative products Risks faced by participants are credit risk, market risk, liquidity risk, legal risk, operational risk Hedging means taking a position in the futures market that is opposite to a exposure in the physical market with objective of reducing or limiting risks associated with price changes Importers, Bullion traders, Jewelers, exporters - Current hedging participants New Participants - Banks to hedge their gold exposure under Gold Monetization Scheme on the exchange platform Current hedging options - Gold Loan /Forwards /Futures Second largest consumer after China and having annual import of 800+ tonne. Annual Gold holding in In India is around 20,000 tonne approximating to 60 Lakh crore. (approx. USD100 bn / 1 tn) Four times the demonetized currency value. Demonetised currency value approx. USD 234 bn. 15 Lakh crore RBI Gold reserve 587 tonne/ Sovereign bond 15 ton / GDS 6 ton Participants in forward/futures markets are hedgers, speculators, day-traders/ scalpers, and, arbitrageurs.

Increased Hedging with futures - Factors Gold Future Rate - a Bench mark Rate - increases Hedge effectiveness Hedging awareness Seminars by Regulators-Exchanges-Members Regulatory Enablers Income Tax Amendment - Futures Trading treated as business income and not Speculative income Guidance note on Derivative accounting – No net impact in the statement of profit and loss under hedge accounting Disclosure requirement for listed company to disclose commodity price risk on and hedging activities in the annual report Adequate position limits Price discovery & Price risk management 800+ tonne of import - Gold OI is 8-10 tonne only – only 1%

Gold hedging with futures - Challenges Hedging for profit mentality Perception - Commodity hedging vs currency hedging High cost of hedging - CTT Except futures no other product available No Liquidity in long dated contracts Daily MTM – onerous operational process Hedging Data disclosure still at an initial stage

Presentation by Kotak Commodity Thank You Presentation by Kotak Commodity

Kotak Commodity Services Pvt Ltd - Introduction Promoted by the Kotak family having over 80 years of core experience in commodity trading Nationwide network of more than 40 branches and 300 franchisees More than 300 employees Dealing rooms are open from 8.30 am to midnight Full-fledged research division involved in macro & commodity research