Posted by: commoditywise | December 24, 2007

NCDEX searches …


ast Friday evening (December 21, 2007) while flipping through TV channels, a news highlight on Zee Business TV channel stopped me flipping further. `Narendra Gupta, market strategist of National Commodities & Derivatives Exchange (NCDEX) put in his papers’. Mr Gupta is known to be next only to CEO & MD Mr P H Ravikumar.

After seeing the news highlight, I waited for more details on the news. There was nothing. I tried the NCDEX website – for official version, but here too there was no mention.  Next day, I tried to search about it in the newspapers, business channels, but there was nothing on Mr Narendra Gupta resigning from NCDEX. For next two days, I was busy with a family marriage, and I could not check for more details about the resignation of Mr Gupta from NCDEX. 

On Sunday, December 23, 2007, The Economic Times carried the news: NCDEX top brass Narendra Gupta puts in papers’. And along with Mr Gupta, even Mukund Annigeri, head of the spot market at NCDEX, and few others are reported to have resigned’. The ET scribe tried to get the official view on the unexpected exodus at NCDEX. PH Ravikumar, MD & CEO replied: “We do not comment on management related issues. I will neither confirm nor deny.” 

Three days after the spot news, on Monday, December 24, 2007, the NCDEX website is silent on the issue. The postings, contents on NCDEX website are as usual. This indicates there is serious thinking and debate within NCDEX and its management on whether or not to let go Mr Gupta and few others of his team that are reported to have resigned, and the management does not want to comment anything at this crucial stage.   

For various reasons, Mr Gupta may or may not want to move out of NCDEX and even the management may not want to let go such a top executive in whom the management had put in full faith and support since NCDEX inception in mid-2003 for the growth of the commodity exchange in the decontrolled era. And Mr Gupta has largely met the expectations of the management. Opportunities in competitive market or is it too-o tiring and futile to fight government supported competition / closed minds?

In the course of business, there have been allegations against and opposition to Mr Gupta and his style of functioning. There have been charges too leveled against him w.r.t. wild fluctuations in select agro commodity prices, but he was cleared of these charges.  According to the report in ET (December 23, 2007): A high-level committee (set up in January 2007) under the chairmanship of Justice PN Bhagwati … directed that a ‘reorganisation’ of the NCDEX management should take place. A section of the market believes that the trouble at the exchange was triggered by intense pressure from the regulator’. 

Since its inception, NCDEX had focused more on trading in agro commodities knowing the importance of risk management required in India’s agro sector. However, agriculture in India though a state subject is intensely political, and that too from Center that seems to have been pretty comfortable playing the market game. Under various pretext, government intervention, meddling, enquiries, bans on trading in futures, etc have been more frequent than expected. This has grossly colored the perception about commodity futures in general and in turn has badly hit the business of NCDEX so much so that NCDEX, which had `grown exponentially in its first few years since its inception in 2003, suddenly saw volumes halve in 2007, to Rs 6.74 lakh crore from 12.4 lakh crore last year’.  

Having stabilized the exchange with both his acumen and management support, Mr Gupta was given the additional responsibility also to device new growth strategy for the exchange that could see volumes climb and possibly steer NCDEX out of the current mire of opposition, complaints, low volumes … and make it stronger to take on challenges in a much open and better regulated environment. 

However, the going at NCDEX seem to be getting increasingly difficult also for Mr Gupta (and few of his colleagues who are reported to have resigned), more so with the government constantly at their back putting clamps on trading in agro commodities – more for political reasons than economical – and with rather less maneuvering room in a market-oriented environment, it could be possible that Mr Gupta (and his team) would not have shown positive growth in trading volumes on the exchange. And then there was this `reorganization at NCDEX’ recommended by the Bhagavati panel. 

Is Mr Gupta along with his team and therefore, NCDEX a victim of high level politics played on the arena of Indian commodity futures market jointly by the competition and allegedly supported by the agriculture ministry? 

It is an open secret that commodity futures market in India seriously requires a strong regulator. But the Indian commodity market players are grossly divided on the subject with the large influential section wanting the status quo – a relatively weak regulator watching over the market with translucent glass, or better still willing to turn a Nelson’s eye – while the other wants a stronger regulator that could also be the part of Securities and Exchange Board of India (Sebi) and more serious players than just day and evening traders pushing volumes on the exchange to take benefits of arbitrage that is not permitted.  

For the overall growth of the commodity and risk management market in India, NCDEX like many others including ministry of finance prefers more transparency, more serious players and a stronger regulation. Mr Gupta and his team part of the forward-looking management team would have been facing the pressure from the powerful lobby and therefore, the decision to resign.   

Or may be it could be something else that only Mr Gupta knows about… 

So, at a time when the commodity derivatives markets are booming, opportunities are emerging and beckoning, competition is rising, NCDEX is searching for a stronger support both within and at the ground level as also at the Center.. 

It is in this larger perspective that the resignation – enforced? – of Mr Gupta needs to be viewed. And may be for these reasons even the NCDEX is silent about the subject of resignation of Mr Gupta and prefers to remain silent while it debates the pros and cons of this unexpected development.  

In any country, fighting government supported competition is extremely difficult, so also for NCDEX and possibly even for Mr Narendra Gupta and his team. Leadership however, is all about pushing ahead with the proactively positive agenda keeping the larger picture in mind … and proving the competition wrong. 

My earlier posts touching upon these issues would be interesting readings

Wheat – US gains on India’s folly 

India’s narrow commodities, evening trades spoil futures game

Sebi may also regulate India’s commodity markets, but…

Evening Commodity Trade – healthier with restrictions 

India’s 25th commodity exchange soon


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