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The National Commodity and Derivatives Exchange (NCDEX) has launched futures trading on NCDEX Agridex, an agriculture index that seeks to provide a holistic view on various commodities traded on the exchange.
Four contracts expiring in June, July, September and December will be available for trading from May 26.
The return-based index 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 rollover in futures contract will be done on the initial three days of the expiry month and the index will be rebalanced annually on the first business day of April.
A floor and a cap are enforced upon the weights of each commodity; besides, sector-specific capping is also done based on the aggregated weight of each sector.
NCDEX has partnered with NSE Indices, an index service provider, to maintain and disseminate real-time NCDEX Agridex values.
Vijay Kumar, Managing Director, NCDEX, said the Agridex futures contracts will provide investors with another tool for trading and risk management at a composite level.
Kapil Dev, Head-Business, NCDEX, said Agridex will be the first tradeable commodity index based on domestic prices.
Since Agridex Futures Contracts provide a diversified cash settled instrument, it will help in widening participation on the exchange from both institutional and retail investors, he added.
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