Multi Commodity Exchange of India (MCX) entered into an MoU with the Northern India Textiles Mills' Association (NITMA) last evening at an event in Ludhiana to jointly engage in outreach initiatives for educating NITMA's members and other relevant stakeholders on the use and benefits of cotton derivatives.
Cotton constitutes about 59 percent in the raw material basket of the Indian textile industry. The global cotton market has been marked by high price volatility and uncertainties, largely on account of factors beyond the control of any stakeholder group or even government. Anannualized volatility of about 13 percent in cotton prices during 2017-18 is much more than the margins of most textile mills. These exemplify the dire need for them to hedge the price risk in order to protect their bottom lines. Textile millers also have a perceived need to access appropriate cotton prices which have been discovered in a transparent and regulated exchange platform with large and diverse participation.
MCX not only provides a robust and efficient platform for price discovery and risk management in cotton but also undertakes several educational and awareness activities to sensitize stakeholders about the modalities of using the derivatives platform. All the large textile mills in the Northern part of India are associated with NITMA and the combined turnover of its members is approx. Rs. 33,000 crores in Domestic market and 3400 crores of exports. The MoU with NITMA will enable the Exchange to reach out to a large stakeholder group, representing more than 100 members and their stakeholders in the cotton value chain across North India - one of the most prominent cotton growing, processing and textiles regions of the country.
Mrugank Paranjape, MD & CEO, MCX said, ''For more than six and half years now, MCX cotton futures has proven to be one of the most useful instruments for price discovery and risk management for multiple stakeholder groups across the cotton value chain, including cotton textile mills. India’s Textiles and Clothing (T&C) exports exceeded USD 36 billion in 2016-17, constituting about 14 percent in the overall Indian export basket. The preponderance of cotton as raw material in the textiles industry and continuing high volatility in cotton prices mean that it is imperative for the managers of cotton mills to create appropriate risk management strategies for ensuring business sustenance. In this context, we are happy to partner with the Northern Indian Textiles Mills' Association. Given the long history and prominence of cotton textile industry in North India in terms of production, employment and exports, as also the active presence of NITMA in this region, I am sure we shall be able to effectively propagate and educate our common stakeholders about the benefit they can derive from cotton derivatives.''
Shares of the company gained Rs 18.45, or 2.45%, to trade at Rs 770.00. The total volume of shares traded was 38,843 at the BSE (3.03 p.m., Thursday).
