National Commodity and Derivatives Exchange has launched futures contract on NCDEX Guarex, India’s first sectoral index in agriculture commodities basket.
Guarex is an index tracking the price movement in the futures contracts of its underlying commodities such as guarseed and guar gum refined splits on a real-time basis. The weightage of guarseed and guar gum refined splits in the index will be 63 per cent and 37 per cent, respectively.
“The first sectoral agriculture index futures contract will garner interest from all sets of participants, including the physical market participants,” said Arun Raste, Managing Director and Chief Executive Officer, NCDEX.
The Exchange had launched the indicative or spot contracts for Guarex on July 5, disseminating the real-time values on its website. The index futures will be cash-settled. Initially, Guarex futures contracts expiring in September and October will be made available for trading.
Price-based index
The index will soon be the benchmark for the entire guar complex, both in the domestic and international markets, making it a value proposition for eligible foreign entities, to hedge their price risk on Indian bourses, he added.
Kapil Dev, Chief Business Officer, NCDEX, said being price-based the index has the potential to trade with different strategies such as arbitrage and calendar spreads. A cash-settled product that is easy to trade will not only appeal to retail participants but will also reckon with the requirements of the institutional players like mutual funds, he said.
India is the world’s largest guar producer accounting for 80-85 per cent of the output, while Rajasthan is the country’s top producer with 80 per cent market share. Guar seed was sown on 1.81 million hectares so far this year, down from 2.25 million hectares logged in the same period last year.
India exports the bulk of the guar in split or flour form called guar gum that is mainly used by the oil and gas industry in shale oil facilities. Guar gum is also consumed by food, pharma, paint and other industrial sectors. India’s guar gum exports have fallen 30 per cent in the last two years.