The uptick in the commodity business of broking houses has to some extent helped in shoring up revenues of domestic broking houses, which are going through a tough time owing to the lacklustre performance of the equity market this year.

?Almost all commodities, including bullion, crude and base metals, have been in an uptrend this year,? said Naveen Mathur, associate director?commodities & currency, Angel Broking. Added Anshuman Jaswal, senior analyst?capital markets, Celent Securities and Investments: ?Rally in commodities has acted as a counterweight to the dismal showing on the equities side.?

Average daily commodity turnover on exchanges has increased to about R85,000 crore from R45,000 crore a year ago. The client base of several domestic brokerages has also seen a spike?for instance, Angel Broking?s client base in the commodities segment has grown 30-35% year on year. In contrast, cash volumes on exchanges this year have been hovering near historic lows as retail participants have stayed away. The equity market has retreated more than 19% in the year to date.

Investors are more comfortable investing in assets that are in a bull phase. ?The mindset of Indian investors is such that they would rather go long than short,? said Mathur, explaining the shift in attention of traders and high net worth individuals (HNIs) towards commodities trading. HNIs have also diversified into commodities as part of their asset allocation strategy.

?The commodities as well as equity market has been volatile this year. But the difference is that while equity markets have been largely directionless, traders have been able to predict the movement on the commodities side and profit from it,? said Atul Shah, COO, commodities, Emkay Global Financial Services.

According to market participants, most of the action in commodities trading has been confined to gold and silver.

?Gold and silver used to contribute 50% to the commodity exchange turnover on MCX and NCDEX. Now they contribute about 70%,? said Mathur. Gold has rallied 25% this calendar year while silver has gained 80%.

To be sure, revenues from the commodities business have not adequately compensated for erosion in margins on the equity side. ?The commodities division of most brokerages is much smaller compared with the equity divisions as brokers have not invested as aggressively in the former as in the latter,? said Jaswal. The outlook for the commodity business for the next year is not as positive as what it was for the last year. ?We cannot expect the same kind of returns in gold and other commodities,? added Jaswal.

Some of the big players in the commodity space include Religare, Karvy, IIFL and Angel Broking.