Indian investors from Monday will be able to take an exposure in the US equity markets on the NSE via rupee-denominated derivative contracts based on S&P-500 and Dow Jones Industrial Average (DJIA).

The new contracts will include futures on both the DJIA and the S&P 500, and options on S&P-500. Also, the trades are to take place in Indian trading hours.

Trading in derivatives on the global indices is restricted to Indian residents only, which means foreign institutional investors and non-resident Indians can not participate on this trade.

Indian investors are currently permitted to invest only in cash market abroad up to $2 lakh a year. Since these instruments are rupee denominated, Indians can now dabble in overseas derivative products.

To create an active market for these products, the NSE has decided not to levy transaction charges on them till February 29, 2012. “However, every trading member participating in trading in the contracts at any time during the above period shall be required to make a lump sum contribution of Rs 500 as contribution to Investor Protection Fund,” the NSE statement said.

Mock trading

The exchange is planning to launch mock trading on Saturday.

“Derivative contracts on these global indices will provide Indian investors easy access to US markets in Indian market hours, without taking any currency risk, Mr Ravi Narain, MD and CEO of NSE, said.

According to the NSE, this is the first time that futures contracts on S&P-500 index is being introduced and listed on an exchange outside the US.

It may be recalled the NSE launched dollar-denominated futures contracts based on the S&P CNX Nifty Index on the Chicago Mercantile Exchange from July last year.

Nifty futures are already being traded on the Singapore Stock Exchange since September 2000. Similarly, the BSE's Sensex is available for trading in the Eurex exchange.

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