Commodity News

Good Start by AGRIDEX Futures at NCDEX

Abhijeet Banerjee
Abhijeet Banerjee

Agridex futures launched by NCDEX on May 25, saw improving participation on the second day. Market participation was therefore better than previous day. On 25th, total of 418 lots were traded with Rs 21 crore volumes while on 26th, total traded lots stood at 467 and Rs 24 crore volumes were noted. Interest amongst broking members and customers has been quite enthusiastic right from launch of this product. Open interest in the June contract increased to 187 versus previous day.  

With a base value of 1,000, Agridex will be available initially for trading of contracts expiring in June, July, September and December. Derivation of the value of this index is based on the spot and futures of the underlying commodities. Agridex is a return-based index with commodity and sector wise weightage. Agridex is a cash-settled index product comprising 10 commodities with highest liquidity or participation at the NCDEX, namely soybean, refined soy oil, mustard seed, chana, coriander, cottonseed oil cake, Guargum, guar seed, castor seed and jeera.  

Framework of the Agridex is based on the revised guidelines issued by the Securities and Exchange Board of India (Sebi). The agency has allowed futures trading in commodity indices in recent months. This index will represent various underlying assets covering agricultural commodities of both Kharif (summer) and Rabi (winter) seasons. The launch at this situation, when market seems concerned about ongoing pandemic, seems to be a welcome move by the exchange, especially when volumes of different commodity futures, have got affected. It is worth noting that volumes at NCDEX in other leading commodities have improved in last two days, after launch of the AGRIDEX futures.  

Agridex futures in coming days seem to be quite beneficial in helping market participants to take advantage of generating returns with less risk and excessive research. This is because they do not have to use much time over researching fundamentals of individual commodities – they only need to know specific news/report pertaining to Agricultural commodities as a whole, so that a particular price direction (upward or downward) can be ascertained and then trade accordingly. The equity market participants are already known to this system wherein they trade at NIFTY index. Hence this product is expected to offer opportunity to those already trading in equity markets as well.

Trading in Agridex futures is expected to benefit various segments based on price anticipation of the products. Agridex in near future is expected to attract numbers of market participants ranging from FPOs, farmers, traders retail, institutional players, among others as this product provides a platform so as to enable then to trade efficiently because of its diversified composition, its return-based rollover and cash settlement process. With lots of reforms coming in from the government, scope for farmers to enhance their incomes have risen which would mean better future of Agricultural commodities from pricing perspective – ultimately seen as a supportive factor the Agridex index to move up higher value- wise, i.e. much higher than the current value of 1000.  

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