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Merrill Lynch expanding India commodity business

DSP Merrill Lynch Ltd is looking to target the commodity hedging needs of Indian companies and would like to be able to trade on Indian commodity exchanges, a senior official from the Indian unit of the largest US brokerage told Reuters.

Merrill Lynch had a global commodity hedging and trading operation and was now ramping up its activities in India, Monish Mahurkar, managing director and head of fixed income, currencies and commodities in India, said at the Reuters India Investment Summit on Wednesday. „The broad macro theme in the whole commodities world is that in the next 5 to 15 years, the two big global players are going to be China and India,” he told Reuters.

Mahurkar said Merrill Lynch saw an opportunity to tap the commodity hedging needs of mid-tier and emerging companies. „The larger ones are already fairly well into the game - they understand their exposure and hedge them actively, but it’s the emerging corporates and mid-cap players where we feel there is some growth opportunity,” he said at the Reuters India Investment Summit. Merrill Lynch does some commodity hedging for some large Indian companies on overseas exchanges, as Indian policy does not allow financial institutions and banks to trade on local commodity exchanges.

Merrill Lynch bought a 5% stake in the Multi Commodity Exchange of India Ltd (MCX) in September, and would like to raise that, depending on the valuation, but the law on foreign ownership stakes is still being formulated, Mahurkar said. „More than that, we would be interested if the guidelines allow us to fully engage with the commodity exchanges and to trade on them,” he told Reuters.