The National Commodity and Derivatives Exchange (NCDEX), India’s largest farm produce-centric online trading platform, has launched Agridex, a purely indigenous agriculture composite index futures trading system. The new index will start trading from today, 26 May, 2020.
Agridex is totally domestic and will represent produce grown in India. The index is also not linked to any external benchmark. With a base value of 1,000, Agridex will be available initially for trading of contracts expiring in June, July, September and December.
The cash-settled agri index has 10 leading liquid contracts such as soybean, chana, coriander, cottonseed oil cake, guargum, guar seed, mustard seed, refined soy oil, castor seed and jeera. The value of this index is generated based on the spot and futures of the underlying commodities.
“The need for a composite index was felt to represent various underlying assets covering agricultural commodities of both kharif and rabi seasons, with price reference round the year. Agridex will help all classes of participants hedge their commodities risk base on price anticipation of underlying products,” said Vijay Kumar, managing director and chief executive officer, NCDEX.
Agridex has been framed based on the revised guidelines issued by the Securities and Exchange Board of India (Sebi), which allowed futures trading in commodity indices recently. Based on its success, NCDEX may launch futures trading in other indices backed by individual commodities.y
“The advantage of having this Agridex is that traders, producers, farmers producers organisation (FPO)s, individual farmers, institutional participants and corporate can hedge their risk in agricultural commodities. Earlier, the focus of the government was on supply. With India having achieved self-sufficiency in most commodities, the focus is now to have marketing tool,” said Kumar.
With a lot size of 500, traders would have facility to place a minimum investment order of Rs 500,000 and a maximum of Rs 2.5 crore (order size of 50 lots) at one go. To attract participation from all classes of traders, the exchange has kept an initial trade margin of six per cent, with 99 per cent value at risk (VAR) and transaction cost of one rupee per RS 1 lakh of value traded on Agridex.