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INDIAN COMMODITIES MARKET

March 14, 2007

NCDEX ± 6th largest commodity exchange in the world
180,000 160,000

169,213

in '000s

140,000 120,000

99,175
100,000 80,000 60,000 40,000 20,000 0
NYMEX Dalian

93,138 78,629 61,814 50,698 42,055 33,790 33,150 28,473

CBOT

LME

TOCOM

NCDEX

ICE

Shanghai Futures

NYBOT

Zhengzhou

Source: UNCTAD, SFOA ³ The world¶s commodity exchanges ± September 2006
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NCDEXNCDEX- 3rd largest agro-commodity exchange agroin the world
99,175
100,000 90,000 80,000 70,000

91,872

in '000s

60,000 50,000 40,000 30,000 20,000 10,000 0
Dalian Commodity Exchange CBOT NCDEX NYBOT Zhenzhou Commodity Exchange Tokyo Grain Exchange Chicago Mercantile Exchange Shangai Futures Exchange Euronext LIFFE Tokya Commodity Exchange

43,287 33,149 28,473

25,575 12,501 9,503 8,499

7,156

Source: UNCTAD, SFOA ³ The world¶s commodity exchanges ± September 2006
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Market growth of 265% over FY05 volumes; 56% growth over FY06
1000 900 800 700 600 500 400 300 200 100 0 127 14.77 FY03 29 FY04 FY05 FY06 April-Feb 2007

739.2

USD Billion

474.33

Unlike developed markets, participation in Indian market is more retail & individual and not institutional
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Present volumes a fraction of the potential USD Bn Current physical volumes 17.0 175 Value chain Futures Traded Volumes 175 239 1.225 Bullion Metals etc Agriculture Energy Total Source: NCDEX Farmers Agents Wholesalers Processors Retailers * 85 325 426 2.5 48.065 5 .

Present legal & regulatory environment 6 .

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

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

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

Going forward « 10 .

Idea will be to forge closer links with global commodities 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  ..

new instruments to attract new market participants 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 .

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  13 .

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

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

Sample Size . Sample Size . they are able benefit through better price realization)  Increase in awareness level in interior areas about commodity futures will help the farmers 16 .255 Narrow Area Sample.Survey carried out by A C Nielsen Yes 12% No 22% Yes 78% No 88% Wide Area Sample.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.

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

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

334 million  NCMSL facilitated finance against commodities to the tune of about USD 80 million as on 31st March.5% .Facilitating lending against commodities Banks¶ lending against commodities in FY06 was USD 1.10. 2006  ICICI Bank: USD 50 million  HDFC Bank: USD 22 million   Other banks: USD 8 million Average Interest rate charged: 9.5%  Number of defaults so far: NIL  19 .

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   20 .

Foreign Access  Foreign access permitted in securities marketequities & 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  21 .

RBI/SEBI notification dated 22. will hold more than 5% of the equity capital   Similar notification expected for commodity markets« 22 .2006 Permits Foreign Investment in infrastructure companies in Indian Stock Exchange to the tune of 49%. including persons acting in concert.12.FDI (Foreign Direct Investment) o With specific prior approval of FIPB 23% . of which  26% .FII (Foreign Institutional Investment) o FII will be allowed purchases in secondary market o FII shall not seek & will not get representation on the Board No foreign investor.

Regulatory Action in Jan-Feb 2007 Jan- 23 .

Jan-Feb 2007 Jan Delisting of Urad & Tur contracts ± Jan 07 Suspension of Rice & Wheat contracts ± Feb 07 Urad Future Prices as of Jan 23 Spot Prices as of Jan 23 Spot Price as of Mar 06 Feb Expiry 71. 30-40% expected production shortage 24 .68 55.04 56.95 51.Sudden delisting of important cereals & pulses .24 (USD/Quintal) Urad: Crop arrivals from Andhra & Burma expected in Feb-March Tur: Arrivals in March.93 49.88 May Expiry 65.31 78.88 71.88  Tur 50.86 March Expiry 69.

expected to be lifted soon« Spot F-May-07 F-Feb-07 F-Jun-07 F-Mar-07 F-Jul-07 F-Apr-07 F-Aug-07 .¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡   £ £ £ £ £ £ £ £                 ¡ ¡ ¡ § ¦ ¨ ¦ ¤ 3 £   ¤ ¥ £   § ¤ ¥ 9 3 9 3 ¦ £ ¨ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢                                                   Rs/quintal 9 9 NCDEX wheat price movements NCDEX wheat price movements Temporary ban on wheat imposed 3 £ £ £ £ £ £ £ £ £ £ £ £ £ £ £ £ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ £ £ £ £ £ £ £ £ £ £ £ £ £ £ £ £                                                                 ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ £ £ £ £ £ £ £ £ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ £ £ £ £ £ £ £ £ £                                     ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ ¤ 25 Temporary ban.

Innovations by NCDEX 26 .

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

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.O en Demat a/c With DP Gets goods to the WH.Dematerialized holding of commodity balances WH WH CLIENT DP NSDL R&T AGENT WH WH . Standardized Screens Accepts goods for storage/ delivery Assaying done and information given to NSDL via R&T 28 .

000 MTs of paddy 29 .2 lakh MTs paddy from MP.Collateral management  Set up National Collateral Management Services Ltd. assaying  Collateral Management  Commodity backed financing  Food procurement for FCI   2005-06 Paddy procurement project  1. Orissa 2006-07 Paddy project  80.000 farmers involved  600. (NCMSL)  Warehousing.

Cote D¶Ivoire Singapore.View Terminal Railway platforms Co-operative offices Panchayat offices .Price Dissemination ELECTRONIC  TV and radio     PRINT  Regional newspapers   News agencies Mobile phones Integrated kiosk Kisan (farmer) Call centres Training material Agri-journals TICKER BOARDS  Member offices       30 Future plans  Rural Post offices    Mandis Bank¶s rural branches Rural warehouses Bus stations Abidjan.

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

About NCDEX 32 .

Our Shareholders Institution NABARD Share 15 % Domain Expertise Apex bank for agricultural lending ICICI Bank 8% Largest private sector bank in India. Now a Standard & Poor company Largest farmer cooperative with affiliation of 36.000 cooperatives Large public sector bank with strong rural reach specially in North India Large public sector bank with strong rural reach specially in South India Global Expertise in commodity markets IFFCO 12% PNB 8% Canara Bank 8% Goldman Sachs 7% 33 . Largest life insurance company in India LIC 15 % CRISIL 12% India¶s first & largest credit rating agency. Highest volume in single stock futures in world. Listed on NYSE NSE 15 % Largest stock exchange in India.

Ncdex¶ market share in total volumes of key agri-commodities (April 2006 -Jan 2007) Cereals & Pulses Chana\Gram Wheat Maize Barley Guar Seeds Urad Tur 87% 98% 99% 100% 85% 87% 91% Oil & Oil seed complex Processed agri-products Guar Gum Sugar Gur Mentha oil 99% 83% 75% 15% Castor Fiber Medium Staple Cotton Kapas Indian 28 MM Cotton 100% 50% 100% Groundnut (IN SHELL) Rape Mustard Oilcake 100% 100% 100% Rape/Mustard Seed Soyabean Seeds Refined Soya Oil Soya_Meal 98% 99% 27% 86% Chilli Turmeric Jeera 98% 100% 95% Spices Pepper 85% 34 .

500 550 59 12 194 By associate company NCMSL Remarks 41 agro.Exchange Profile Number Products Members Terminals Delivery Centres Depository Participants Clearing Banks Weather Stations 51 852 18. 2 energy and 6 metals Spread across India Accessible from 700 centres All over the country 35 . 2 bullion.

Thank You 36 .

0 100 NCDEX 37 .0 11.Market Share ± Agri. Commodities MCX Other Share Exchange (%) NCDEX MCX Others 85.0 4.

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.444 125.136 Exchange¶s are a platform for better prices discovery 38 .000 MT per month Period Q4' FY05 Q1 µFY06 Q2 FY06 Q3 FY06 Q4 FY06 Q1 FY07 Q2 FY07 Q3 FY07 Jan-Feb FY07 Deliveries (MT) 43214 109562 83081 77160 134260 103.128 37. NCDEX has seen an average delivery of 4050.989 94.

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

3 28.90 63 45.Number of contracts traded .Economic Survey In millions Exchange / Year NCDEX 2004-05 2005-06 2006-07 11 27.42 23.45 40 .3 16.65 Others 4.38 % market share in India 71.