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NCDEX has tied up with Skymet Weather Services to source data to put together a weather index and subsequently seek SEBI approval for launching derivatives trading on the index.
The exchange will use IMD definitions on various predictions such as normal, above normal and deficit, and compare them with actual rain on a daily basis to arrive at the value of the index.
Kapil Dev, Head – Agriculture Business, NCDEX, told BusinessLine that once the exchange shares knowledge and provides historical data, investors can take a call on their investments in the futures trading of the weather index.
“The value of the index will be useful to people across the agriculture value chain as it will not only help them to plan their business but also keep track of the actual rainfall on a daily basis,” he added.
The exchange will launch two indices – the Annual Rainfall Index and the Monsoon Index.
NCDEX expects the weather index to attract institutional investors and mutual funds as the transactions are are cash-settled.
Agridex
On the trading interest in recently launched Agridex, Dev said it has attracted an average daily turnover of ₹15 crore despite minimal publicity and restricted awareness programme due to the lockdown.
The June contract of the Agridex futures was down three per cent at ₹1,044 on Monday. It had hit a high of ₹1,054 and low of ₹1,041.
The return-based Agridex comprises 10 liquid commodities traded on NCDEX. It has commodity-wise and sector-wise floors and caps, with no single commodity or sector dominating the index.
Agridex has low correlation with other asset classes and indices. To ensure diversification, no group of related commodities may constitute over 40 per cent of the total weightage in the Index.
The index helps investors to get exposure to various commodities without worrying about taking delivery of the commodity, Dev said.
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