As time passes, the contract price changes relative to the fixed price at which the trade was initiated, thereby resulting in either a profit or loss. In most cases, delivery never takes place with the buyer and seller acting independently of each other, liquidating their position before the contract expires.

The annual growth potential for the futures market is deemed at $1,500 billion in the country, which NCDEX's chief executive P H Ravikumar estimates at "a conservative Rs 30,000 crore". The market today is churning out just Rs 7,000-8,000 crore (Rs 70-80 billion) per day, therefore a four-five fold growth is easy, if industry experts are to be believed.

While an Assocham study suggests the segment's turnover would cross the Rs 1,00,000 crore (Rs 1000 billion) mark by 2010, looks like this figure will be crossed  in the current financial year itself given that it had notched Rs 57,000 crore (Rs 570 billion) during April-August 2005.

Rutten commends the extremely short period - barely two years - in which the market overcame its teething troubles. "It's usually taken longer in most international markets. By the end of another year or so, a maturity period will set in. This will lead to the deepening of the market.

As they move towards consolidation, the exchanges will improve their work set-up and conditions and start looking at the international markets." This rapid development, says Ravikumar, is on account of the sector's "deep reliance on technology.

It has allowed us to take the market to everyone's doorstep, which ring-based trading could not have done. And our cost is just a tenth of international costs".

But growth is likely to be dependent on investment in warehousing, professional training and base expansion and diversification.

Today, the futures market has around 150-200 warehouses across the country, not owned but hired by the exchanges. With the expected entry of institutional investors into the segment, growth in this sector is important.

"The investment required over the next three years by third party can be around Rs 300-500 crore (Rs 3 to 5 billion)," says Joseph Massey, deputy managing director of
the Multi-Commodity Exchange of India.

Small investments have come from agro-processing firms, medium-sized companies, speculators, and even cooperative and procurement agencies for infrastrucure and back-hand operations.

"However, this is not enough. Not all corporates are in and entry of banks, mutual funds, financial institutions and retail firms is still not clear," said Ravikumar. Institutional investors are the mainstay of the futures market globally, but not yet in India.

Investment is likely to start trickling in by the year-end, adds Ravikumar, "and we foresee big investment decisions in the next 6-18 months".

Professional training is another sector that requires immediate attention, and the exchanges have had to pool resources to work with institutions like the IIMs, Symbiosis, or Indian Institute of Foreign Trade, to include course modules.

NCDEX, meanwhile, has initiated a Commodity Certification Examination in partnership with the National Stock Exchange, and 6,000 candidates so far have taken the examination.

"More than monetary and infrastructure investment today, growth is dependent on policy changes," says Massey, "such as the amendment to the Forward Contract (Regulation) Act, 1952, entry of banks, mutual funds and
FIIs in the sector, and the Warehousing Development and Regulation Bill ."

The government is considering amendments to the FCRA in the winter session of Parliament to strenghten the regulator Forward Market Commission  by enabling it to become an independent and autonomous body like the Securities and Exchange Board of India.

The amendment will also provide for the setting up of a Forward Markets Appellate Tribunal on the lines of the Security Appellate, apart from addressing issues such as options trading, redefine commodities to include energy and weather, and push forth demutualisation of regional exchanges.

"Futures is the reason why farmers in Punjab have finally understood that shift from paddy and wheat to pulses or oilseeds is monetarily better," says D K Mukhopadhayay, economic adviser with the department of consumer
Affairs.

Is it all about speculation? Is it the right time to invest? Is it safe or speculative? These are typically questions that bog down investors, and the speculative trade in guarseed on NCDEX simply adds to that confusion - for a commodity worth Rs 1,000 crore, the exchange is able to achieve a turnover of Rs 50,000 crore! Guarseed and gum exporters feel the market has destroyed their business as prices are reigning to new highs. The sugar industry feels the contracts are biased in favour of the seller. Exchange officials, however, deny the bias in the contract's structure; they accept that about 90 per cent of the total contract delivery is recycled back into the trade. However, every financial market has speculators as an integral part of the industry. And with the market regulator FMC trying to build strong linkages between the futures and physical markets, the speculative element can be restrained to a reasonable level, say industry experts. In late 1998, a bull market in commodities began and if Jim Rogers, the supremo of the sector, is to be believed, the run will continue for at least 15 years, thereby making it "the most lucrative market for today and tomorrow", he writes in his book Hot Commodities. Globally now, investors aren't just looking into the futures market but also at investments in gold or silver exchange traded funds, and commodities is the next extension on their portfolios. Or, as Rogers might say: "To be a truly great investor is to know something about commodities."