The Hindu Business Line : NCDEX launches agri index

The index acts as a barometer of the underlying (agri) sector's performance. It also indicates the relative performance of the sector vis-à-vis the reference period and acts as a powerful information tool and benchmark for investment performance.

Mumbai , May 3

FOR the first time, a commodity index has been launched in the country. The National Commodity and Derivatives Exchange Ltd (NCDEX) on Tuesday launched the agri composite index NCDEXAGRI.

"We have adopted the equal weighted index. It will have equal representation of 20 commodities traded on the exchange," Mr Narendra Gupta, Chief Business Officer, NCDEX, said.

The agri commodity sub groups in the index includes cereals, pulses, oilseeds, plantation crops, fibre crops, spices and sugar, gur and guar seed.

Mr S. Sundareshan, Chairman, Forward Markets Commission, inaugurated the index at the NCDEX office.

At the inaugural session, the index opened at 1,213.16 points at 11.30 a.m. and declined to 1,211.15 at 1.00 p.m. Finally, it closed at 1,209.96 at 5 p.m.

The exchange said it would update the agri index twice on weekdays and once on Saturdays with spot prices of the exchange.

Three types of index construction are popular worldwide - the value weighted index, equal weighted index and price-weighted index.

An equal weighted index indicates that an equal amount would be invested in all the index constituents. Equal weighted indices are more popular as an investment benchmark. Popular commodity indices such as Goldman Sachs Commodity Index and Standard and Poor Commodity Index have adopted the equal weighted system.

The reference period for the NCDEX agri index is the average price of the benchmark variety that prevailed during 2001.

"The choice of year 2000-01 (FY) is that 2001 is a normal year. Commodities are selected in such a way that inclusion and exclusion do not happen very often," Mr S. Lakshmi Narasimhan, Assistant Vice-President, NCDEX said.

Membership registration draft ready: Inaugurating the index, Mr S. Sundareshan, Chairman, Forward Markets Commission, said draft rules for registration of exchange members with the commission had been formulated.

The commission has circulated the rules to the commodities exchanges for suggestions and has also posted them on its Web site for comments.

"We are thinking of making themcompulsory," Mr Sundareshan said.

He clarified that compulsory registration of members was not a revenue generating mechanism but is purely a regulatory one.

The FMC would closely monitor price movements of individual commodity on a weekly basis to check volatility.

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