After gold, silver can India look forward to Agri-ETFs?

After the launch of Gold ETFs (Exchange Traded Funds), which has been well received in India and the soon-to-be-launched silver ETFs, can investors look forward to India based Agri-ETFs?

The returns from western Agri-ETFs—funds invested in agri-commodities/companies that can be listed and traded in stock-exchanges--beat by a 10% (minimum) margin; the average returns provided by all India based gold ETFs taken together into account!

For instance, The PowerShares DB Agriculture fund has under its wings futures contracts on corn, sugar, wheat, cotton and even live cattle; the most widely traded commodities. The fund has risen 35% since July, according to theglobeandmail.com.

Or, take the case of the Claymore Global Agriculture ETF that holds thirty six stocks, including Archer-Daniels-Midland Co., Potash Corp. of Saskatchewan, Deere & Co. and Monsanto Co. The ETF has risen 46% since last July outperforming the MSCI World index by giving double the returns in comparison.

Agri-ETFs in India?

In December in the Indian Parliament, Forward Contract Regulation Amendment Bill was tabled, and if it gets approved in the current session may pave the way to more derivatives entering the markets, including Agriculture ETFs, said a senior official with Forwards Market Commission of India.

And it seems Geojit, is interested in reaping the opportunities that such an initiative, an Agri-ETF fund would bring in; says CP Krishnan, Commodities Head, Geojit BNP Paribas:

“We expect such a concept to work out in India. There can definitely be ETFs in agri-commodities in non-perishable baskets like black pepper, Guar seed, soya etc.”

But will it have a pan-India appeal?

Pritam Kumar Patnaik of Kotak Commodities points out that even investments in gold-ETFs just form a fraction of inflows when compared investment inflows into physical gold.

“The agri-commodities are geography-specific and diverse and hold little chance when it comes to ETF investments given the knowledge aspects (regarding a commodity).”

But contrast this with the view that CP Krishnan, provides, “ ETFs have just been started off in India and as and when people begins picking it up, finance companies can start to offer Agri-ETFs investment options.”

It is just a question of time, and of course, regulatory approval!

As published in: http://www.commodityonline.com/news/After-gold-silver-can-India-look-forward-to-Agri-ETFs-37358-3-1.html