In a major move, the National Commodity and Derivatives Exchange (NCDEX) has launched India’s first agri index — ‘NCDEX Agridex’, for easy reference to price variations in agricultural commodities.
Launched with a composition of 10 leading liquid contracts on the NCDEX platform at present, the index is now available as ‘indicative’. It will be made tradable after being approved from the Securities and Exchange Board of India (Sebi). NCDEX has already applied for a formal approval from Sebi, which, according to trade sources, is likely to be cleared soon.
The NCDEX’s index launch is in continuance with Sebi’s plan to broaden its horizon in commodities trading through the introduction of a new set of players and products. Sebi has already allowed some sections of mutual funds to trade in select commodities. The regulator had also allowed trading in ‘options’ in leading liquid commodities.
“The NCDEX Agridex will finally fulfill the dream to serve benchmark for the Indian agriculture ecosystem. It will act as a robust indicator of the broader market and its strong surveillance will give enough confidence to the traders,” said Kapil Dev, executive vice-president, of the NCDEX. For indices, the NCDEX has partnered with NSE Indices, a leading index service provider, as a third party, to maintain and disseminate real-time NCDEX Agridex values.
Leading commodities such as guar seed, guar gum, soybean, chana, mustard seed, and jeera, etc, will be the index’s constituents. These contracts will be cash-settled, in accordance with the regulator’s guidelines.
“NSE Indices is a leading index player in the capital markets, and this is one more engagement through which we have demonstrated our strengths in the indexing space,” said Mukesh Agarwal, chief executive officer of NSE Indices.
These index futures contracts will not only provide the opportunity to hedgers to hedge their position in a more dynamic way, but will also provide unique trading and arbitrage opportunities to market participants. As the index represents a diverse basket of commodities, it is less risky and more predictable, compared to individual commodities. Futures trading on Agridex will also enhance overall liquidity on the exchange platform.